Adipic Acid: Vigorous Import Growth    

Adipic acid is mainly used to manufacture nylon 6,6, plasticizers, grease, polyurethane etc. There are three major commercial production processes: cyclohexane process, cyclohexanol process, butadiene carbonylation process, and the air oxidation of cyclohexane process constitute 93% of the total.
   The adipic acid industry in China started late but developed fast. At the end of 2006, the production capacity for adipic acid in China reached around 250 thousand t/a. PetroChina Liaoyang Petrochemical Co., Ltd. (140 thousand t/a) and China Shenma Group Co., Ltd. (107 thousand t/a) are the largest domestic adipic acid manufacturers. In addition, there are now over twenty small companies each with a capacity under 1 thousand t/a.
   But the demand for adipic acid was weak recently in Asia, due mainly to a supply deficit of MDI (diphenylmethane diisocyanate) to produce polyols in the polyurethane sector. In 2006, China imported 182 thousand tons of adipic acid. However, the import volume reached 192 thousand tons in the first eight months of 2007. Some companies are considering expanding their adipic acid capacity in China. But only China Shenma Group now has decided to expand its adipic acid unit, located in Pingdingshan of Henan province, by 35 thousand t/a in order to meet the growing demands both in the company and the outer market, which is expected to be completed in 2009. Liaoyang Petrochemical is now looking at expanding its adipic acid capacity by 160 thousand t/a after successfully expanding to 140 thousand t/a in 2004 and plans to boost its total capacity to 300 thousand t/a in two years.  Other manufacturers also announced expansion plans in China, but afterwards some companies withdrew their plans for lack of a patent license or raw material supply. Several years ago, Xinjiang Dushanzi Tianli High & New Tech Co., Ltd. planned to construct an adipic acid project, and construction was finally started in May 2006, scheduled to be operational in 2008 with a capacity of 75 thousand t/a. (CCR2006, No.28) With its existing 3 thousand t/a adipic acid capacity, Taiyuan Chemical Industry Co., Ltd. stopped production because of the plan to expand to 50 thousand t/a several years ago. In July 2007, Taiyuan Chemical Industry Co., Ltd. applied for issuing new stocks to raise funds for the expansion, which was not approved yet at the end of September 2007. In addition, an 80 thousand t/a adipic acid unit of Shandong Bohui Chemical Industry Group Co., Ltd. is expected to go on stream in November 2007, and a 100 thousand t/a adipic acid unit in Shandong Hongye Chemical Industry Group Co., Ltd is hopefully for startup in October 2008.
   
Short Supply and Climbing Prices in 2006

Since 2006, the supply of adipic acid has always been tight in China. Liaoyang Petrochemical still plays a dominant role among the domestic suppliers. Shenma Group manufactures adipic acid mainly to produce nylon 6,6 internally. In addition, since 2006 the company has not only ordered around 20 thousand tons of adipic acid from Liaoyang Petrochemical but also imported over 5 thousand tons of adipic acid from Rhodia of France, INVISTA of the United States and Solutia of the United States to produce nylon 6,6.
   As far as suppliers of imported goods are concerned, the sudden emergence of Solutia is one of the most remarkable changes in the Chinese market in 2006. In the first half of 2006, the goods from Solutia with relatively lower price were quickly accepted as soon as they entered the Chinese market and close communications with the traders and downstream companies was established in Wenzhou, Zhejiang province. Even Shenma Group imported two thousand tons of Solutia's goods. In 2006, the supply in Chinese market of Solutia's product exceeded that of other major suppliers including RADICI of Italy, BASF of Germany and LANXESS of Germany. Aside from Solutia, Rhodia, INVISTA, RADICI and Ukraine all increased their supply to China of adipic acid compared with 2005. However, the supply from Asahi Kasei of Japan, BASF and LANXESS declined in 2006 due to the tight supply in the overseas market.
   Since 2007, the tight adipic acid supply situation has been relieved to some degree, and imports have increased greatly month by month compared with 2006. China imported 220 thousand tons in the first nine months, up 56.4%. From the perspective of domestic suppliers, there was no great difference in the supply of Liaoyang Petrochemical between 2007 and 2006, but the supply strategy of the company changed greatly this year. In 2007, PetroChina Company Ltd. started unified sales and price fixing of adipic acid products manufactured by Liaoyang Petrochemical. And after April 2007 those products have been supplied mainly to downstream contract customers, leaving little to independent distributors. PetroChina offers every month.
     From China's perspective the situation of foreign suppliers has been stable in 2007. The goods imported from Korea, Germany, the United States, Ukraine and Singapore are most of the total imports. A small part of the goods imported from Korea is made by Asahi Kasei factory, and others are made by Rhodia factory in Korea. Adipic acid from Rhodia has been on sale with basically at high price in China for a long period with relatively stable agent distributors and customers. Asahi Kasei owns 50 thousand t/a share capacity in the joint venture with Rhodia, so Asahi Kasei also has some adipic acid that is manufactured in Korea and can be imported to China. Asahi Kasei has stable clients in China, mainly through direct sales. The goods imported from the United States nearly all come from Solutia. In the boom season, China imports around 5 thousand tons of adipic acid per month from Solutia.
  The German supply of goods is relatively complex, which is mainly produced by RADICI and BASF with small part by LANXESS. RADICI has also exported some from its factory in Italy. Since 2004, LANXESS started to export adipic acid to China, increased supply in 2005 but reduced in 2006. Now LANXESS focuses on some downstream end users. The goods imported from Ukraine mainly come from Severodonetsk and Azot Rivenm, are mainly sold by authorized distributors in China and are always sold at a low price due to the long transport period. But China imported a large amount of goods from Ukraine - around 3 thousand tons per month. The goods imported from Singapore are mainly from INVISTA's factory, and the volume climbed greatly in 2007.

The decline in the domestic market

In the first nine months of 2007, the price of adipic acid has gone down. It hovered at RMB20 000 - RMB21 000 per ton during January to March. With the gradual passing of the demand boom, adipic acid's price started to go down in April and May. In early August, the market price of adipic acid climbed to RMB18 000 per ton from the low point of RMB16 200 - RMB16 500 per ton. At the end of August, the market turned slack again, and reached another low of RMB16 500 per ton in the first half of September.
     In 2007 the glory has not appeared again in the market price of adipic acid to reflect the same period of 2006. The reason for that is very complicated, but it can be attributed to the imbalance of supply and demand. Besides, human factors also play an important role in the skyrocketing price in 2006. Looking forward to the future, a strong market for adipic acid in China cannot be expected.

Imported Adipic Acid by Supplying Country during Jan-Sep 2007
Country     Imports (t)    CIF Price (US$/t)
Total       220 752    1 964
Korea    &nbs