Nanning Chemical: Capacity Expansion Ensures Better Performance      

Nanning Chemical Industry Co., Ltd. (Nanning Chemical, SH: 600301) is an important producer of basic chemical raw materials in China. It is located in Nanning of Guangxi province in southern China. The company was listed on the Shanghai Stock Exchange in July 2000. It is mainly engaged in the research, development, production and sales of chlor-alkali chemicals, pesticides and disinfectants. According to the company' annual report, the operating revenue accomplished in 2007 was RMB1.822 billion, an increase of 41.95% over 2006, and the operating profit was RMB77.31 million, up 22.84%.

Remarkable regional dominance   
The company is the biggest chlor-alkali enterprise in southern China with a regional monopoly advantage. It owns a capacity of 260 000 t/a caustic soda, (including 160 000 t/a ion-membrane caustic soda and 100 000 t/a diaphragm caustic soda), 120 000 t/a hydrochloric acid, 80 000 t/a liquid chlorine, 120 000 t/a PVC (polyvinyl chloride), 8 000 t/a trichlorfon and 15 000 t/a symclosene. Its 30% liquid caustic soda, trichlorfon and symclosene have many times won the title of famous and excellent products in Guangxi province. The company's caustic soda capacity holds a leading position in southern China. The company is one of the biggest caustic soda suppliers in southern China and holds a market share of nearly 80% in Guangxi and nearly a 30% share in the market of three provinces (including Guangxi, Guangdong and Hainan). The firm's output of pesticides and PVC is more than 70% of the Guangxi total. The company owns import and export rights, and exports products to many countries and regions in Southeast Asia and Europe.
   The company acquired 100% equity in Nanning Chia Tai Building Material Co., Ltd. at a price of RMB140 million. (CCR2006, No. 24) The cement production line was technically renovated after the acquisition to digest carbide slag generated by PVC production. The renovation project is hoped to qualify under tax policies intended to promote comprehensive utilization of resources. In the macro environment of energy conservation and pollutants reducing, the project will likely get considerable support under recent state policies.

Industrial chain extension   
Nanning Chemical has successfully controlled Wuzhou Lianyi Chemical Co., Ltd., Guizhou Anlong Huahong Chemical Co., Ltd. and Xingyi Ligen Electric Smelting Co., Ltd. through investment increases and equity expansion. It now holds 51.00%, 54.17% and 51.54% equity respectively in these three companies. In this way the company effectively controls the caustic soda market in southern China and ensures the supply of raw material calcium carbide. Nanning Chemical will offer these companies management experience and technologies, constantly expand capacity and develop them into strong drivers for the overall development of the enterprise.

Chlor-alkali business expansion   
The second phase of the 100 000 t/a ion-membrane caustic soda expansion project launched in November 2006 was completed and put on stream in June 2007, bringing the total caustic soda capacity in the company up from 220 000 t/a to 260 000 t/a.
   A natural circulation bipolar caustic soda unit using new techniques for both energy conservation and environmental protection to replace the diaphragm caustic soda unit involved an actual investment of RMB44.1562 million. A brine and hydrogen chloride concentration renovation project using new processes and new technologies cost RMB82.0045 million. These two projects were already completed at the end of 2007.
   In 2007 the company agreed to establish Nanning Luzhou Chemical Co., Ltd. in collaboration with Nanning Zhenning Asset Management Co., Ltd., Nanning Zhuangning Asset Management Co., Ltd. and Nanning Jianning Water Group Co., Ltd. to produce caustic soda and PVC. Nanning Chemical holds 51% equity in the new company. (CCR2007, N0. 23) Nanning Luzhou Chemical Co., Ltd. will construct a 300 000 t/a ion-membrane caustic soda unit and a 80 000 t/a epichlorohydrin unit with an investment of around RMB2.1 billion, as well as a 320 000 t/a PVC unit and a matched 800 000 t/a cement production line making the comprehensive utilization of calcium carbide slag with an investment of around RMB952.99 million.
   The company also plans to increase investments in Xingyi Ligen Electric Smelting Co., Ltd. and hold 51% equity. A 400 000 t/a calcium carbide expansion project will then be launched to meet the demand in the chlor-alkali production.
   With the dual impact of industrial prosperity and capacity expansion, Nanning Chemical aims to maintain rapid performance improvement in the next three years.