Fierce Competition in China’s Adipic Acid Market
Year:2013 ISSUE:6
COLUMN:ORGANICS
Click:211    DateTime:Nov.05,2013
Fierce Competition in China’s Adipic Acid Market

By Yan Feng

Rapid capacity expansion in China

In recent years, the fat profits reaped by adipic acid producers from soaring prices have motivated many enterprises to invest in new adipic acid units, increasing China’s capacity drastically to around 920 thousand t/a by 2012, making China the second largest adipic acid producer in the world, the United States being first. Shandong Bohui Group Haili Chemical Co., Ltd is China’s largest adipic acid producer, with a capacity of 225 thousand t/a, accounting for around 24.46% of the national total. Shandong Hualu Hengsheng Chemical Co., Ltd comes next with a capacity of 160 thousand t/a, accounting for around 17.39%. All of China’s producers use cyclohexane as raw material except Henan Shenma Nylon Chemical Co., Ltd., which uses cyclohexene. China’s major adipic acid producers are listed in Table 1.

Table 1 China’s Major Adipic Acid Producers in 2012
Producer    Capacity (kt/a)    Remarks
PetroChina Liaoyang Petrochemical Co., Ltd    140    Licensed cyclohexane process technology from Rhodia of France; product is mainly sold on the open market

Henan Shenma Nylon Chemical Co., Ltd    150    Licensed cyclohexene process technology from Asahi Kasei of Japan; expanded capacity by 100,000 t/a in 2010; all product is used in house for nylon 66 production

Shandong Bohui Group Haili Chemical Co., Ltd    225    Uses cyclohexane process technology; first and second phases were completed and put into operation in 2008; third phase, 75,000 t/a, went on stream in 2010  

Shandong Hongye Chemical Industrial Group Co., Ltd    140    Uses cyclohexane process; completed and put into production in 2008

Xinjiang Dushanzi Tianli Hi-tech Co., Ltd    75    Uses cyclohexane process; started up in 2009; has no matching downstream units; was subordinate to PetroChina in 2010; all product is sold on the open market

Shandong Hualu Hengsheng Chemical Co., Ltd    160    Started up in April 2012
Others    30    
Total    920    
Source: CNCIC

   With the rapid development of China's polyurethane sector, the domestic consumption of adipic acid has increased steadily in recent years.  However, the output of adipic acid in China cannot meet the actual demand. Since China imposed anti-dumping duties on adipic acid imports in November 2009, the domestic price of adipic acid has climbed stably, further increasing the profit space of domestic adipic acid producers. Therefore, many domestic enterprises have planned to expand or construct adipic acid units (see Table 2). If these projects are built and put into production on schedule, it is expected that by 2016, China's total capacity to make adipic acid will exceed 2.5 million t/a.

Table 2 China’s Newly-added Capacity of Adipic Acid during 2013-2016
Producer    Newly-added Capacity (kt/a)
Shandong Bohui Group    300
Shandong Hongye Chemical Industrial Group Co., Ltd    140
Henan Shenma Nylon Chemical Co., Ltd    250
PetroChina Liaoyang Petrochemical Co., Ltd    160
Xinjiang Dushanzi Tianli Hi-tech Co., Ltd    75
Linyi Branch of Shanxi Yangmei Fengxi Fertilizer Industry (Group) Co., Ltd    70
Huafeng Group    160
Hebei Kailuan Coal Chemical Group    150
Qingxu New Chemical Materials Co., Ltd of Shanxi Yangquan Coal Industry (Group) Co., Ltd    140
Hebei Xingtai Xuyang Coal Chemical Co., Ltd    40
Shaanxi Yanchang Petroleum Xinghua Chemical Co., Ltd    70
Sichuan Shengda New Chemical Materials Co., Ltd    175
Sichuan Chuanhua Group Co., Ltd    200
Tianji Coal Chemical Group Co., Ltd    70
Shanxi Taiyuan Chemical Industry Co., Ltd    50
Source: CNCIC

Huge market pressure

With the rapid development of the nylon and polyurethane sectors, China’s consumption of adipic acid has increased steadily in recent years. The apparent consumption of adipic acid in China was only 335.4 thousand tons in 2006, but in the next year it leaped to 490.4 thousand tons. In 2008, China’s polyurethane and nylon sectors were affected by the global financial crisis, and the apparent consumption of adipic acid was reduced to around 429.8 thousand tons, a drop of around 12.36% from 2007. Apparent onsumption of adipic acid reached 727.6 thousand tons in 2011, up around 4.34% year-on-year, concluding six years of an average annual growth of apparent consumption of about 13.88%, 2006-2011. Correspondingly, the self-sufficiency rate of adipic acid in China also increased constantly. It was 58.44% in 2005, and climbed to 86.06% and 94.83%, respectively, in 2009 and 2011. China’s supply and demand of adipic acid during 2005-2011 are listed in Table 3.

Table 3 China’s Supply and Demand for Adipic Acid during 2005-2011 (kt)
Year    Output    Import    Export    Apparent consumption    Self-sufficiency rate (%)
2005    196.0    142.2    2.8    335.4    58.44
2006    200.0    182.3    2.4    379.9    52.64
2007    214.9    278    2.5    490.4        43.82
2008    270.0    162.3    2.5    429.8    62.82
2009    460.0    83.4    8.9    534.5    86.06
2010    660.0    68.4    31.1    697.3    94.65
2011    690.0    75.8    38.2    727.6    94.83
Source: CNCIC


   Before 2011, adipic acid in China was mainly used to produce nylon 66 salt. Thereafter, with the rapid development of the markets for polyurethane shoe soles and polyurethane sizing agents, the consumption mix of adipic acid in China changed greatly. The consumption mix has shifted from a focus on the production of nylon 66 salt to a focus on the production of polyester polylol for polyurethane materials. In addition, some adipic acid is also used in the production of adipates such as dioctyl adipate and unsaturated polyester resin. In China, the development of the nylon plastics sector has slowed down while the polyurethane sector has developed rapidly, so there is a great difference between China and other countries in the consumption mix of adipic acid. China’s polyurethane sector consumed 63.2% of the adipic acid used in the country in 2011, around 23.1% was used in the nylon 66 sector and around 13.7% in other sectors like plasticizers.
   It is expected that the total demand for adipic acid in China will be around 1.0 million tons by 2016. The polyurethane sector will be the main driving force to promote the growth of adipic acid demand. The use of adipic acid in the production of nylon 66 salt and plasticizers will also increase considerably, but the nylon 66 salt and plasticizer sectors now have limited effect on the growth of adipic acid demand. China’s capacity to make adipic acid will exceed 2.5 million t/a by 2016, much greater than the country’s forecast demand. Furthermore, China’s anti-dumping measures on adipic acid imports will end in 2014, after which imported adipic acid will have huge impacts on the domestic market. Therefore, the market pressure of adipic acid in China will increase in the next few years, and competition will be increasingly fierce.
In recent years, the global adipic acid sector has developed steadily. However, due to both the slow development of downstream products and environmental issues, the growth of production and consumption of adipic acid in North America and Western Europe has slowed down. Asia, especially Mainland China, will become a key driver for the growth of production and consumption of adipic acid in the world.
   With the constant development of the polyurethane sector, the demand for adipic acid in China will still climb continually. However, due to the drastic price rise of adipic acid a few years ago, high profits have stimulated some domestic enterprises’ enthusiasm for expanding and constructing adipic acid units. Therefore, China’s new capacity to make adipic acid will increase constantly, an oversupply situation will be emerge, profit margins will be greatly reduced, and market competition will become fierce. Furthermore, when China’s anti-dumping measures end in 2014, imported adipic acid will have huge impacts on the domestic market, making competition even. Therefore, domestic enterprises should become very cautious attitude in expanding capacity. Except for the projects now under construction, it is rash to continue to construct adipic acid units, inviting waste and losses.
   In China, adipic acid is produced mainly by the nitric acid oxidation process, which has a greater impact on the environment than other methods. With further progress in energy conservation and emission reduction measures and with the people’s increased insistence upon protecting the environment, China’s adipic acid enterprises will face new challenges with regard to saving energy and reducing emissions. Therefore, China should strengthen the research and development of technologies, actively research clean production processes and reduce the emissions of acidic wastewater and greenhouse gases in order to reduce the negative impacts on the environment and improve the economic benefits of enterprises. The key is to accelerate the development of technologies for adipic acid production like green synthesis technologies that uses cyclohexene and hydrogen peroxide as raw materials and biological synthesis technologies to narrow the gap with the world’s most advanced producers as soon as possible and to enhance Chinese firms’ competitive edge in the international market.
   In China, adipic acid is mainly used in the polyurethane sector, whereas in the developed countries and regions like the United States, Western Europe and Japan, it is used mainly to produce nylon 66 resins and fibers. Therefore, China should gradually change its consumption mix of adipic acid and increase the proportion of adipic acid consumed in the manufacture of nylon 66 resin and fibers. This can expand the production of adipic acid for producing nylon, and more importantly, can adapt to the international trends and expand the export of adipic acid to these countries and regions. The key to increasing nylon 66-related consumption is to solve the technical problems of adiponitrile production as soon as possible.
   With the startup of many new or expanded adipic acid units in the next few years, China’s short supply of adipic acid will be completely changed, and the country will switch from net importer to net exporter of adipic acid. Therefore, China should improve the product quality and actively expand exports to avoid the forecast oversupply and promote the healthy and steady development of the whole sector.