China’s DMF Industry: Overcapacity Persists while Consumption Shrinks

By Hou Shuyun, Shandong Hualu Hengsheng Group Co., Ltd.

Dimethylformamide (DMF), an important chemical raw material and excellent solvent, is used to manufacture polyurethane (resin), pharmaceuticals, dyes, electronics and food additives.
   While DMF production technologies advance and production capacity expands in China, both the capacity and output of DMF in the rest of the world are shrinking. Therefore, the global demand for DMF increasingly relies on China.

I. Surplus capacity leads to severe competition

China began to manufacture DMF in the early 1970s. Before 1990, the development of China’s DMF industry was slow. There were only several small production units, mainly using the methyl formate method which is a simple process with high production costs. DMF products made by the methyl formate method have low purity and limited application scope. After 1990, with the rapid development of acrylic fiber and polyurethane synthetic leather, China’s DMF industry grew rapidly. Especially, the capacity of the industry has increased significantly since the popularization of the one-step production process using carbon monoxide. At the end of 2012, the total capacity of China's major producers, including Shandong Hualu Hengsheng Group Co., Ltd, Zhejiang Jiangshan Chemical Co., Ltd., Zhangqiu Riyue Chemical Co., Ltd., Taminco Lingtian (Nanjing) Fine Chemical Corporation and BASF-YPC Co., Ltd., reached 1.17 million t/a. China’s major DMF producers are listed in Table 1.

Table 1 China’s major DMF producers in 2012 (kt/a)
Company    Capacity
Zhejiang Jiangshan Chemical Co., Ltd.    180
Inner Mongolia Yuanxing Jiangshan Chemical Co., Ltd.    100
Shandong Hualu Hengsheng Group Co., Ltd    240
Anhui Huaihua Group    50
Haohua Junhua Group Co., Ltd.    30
Anyang Chemical Industry Co., Ltd.    150
Hebei Lingang Chemical Co., Ltd.    20
BASF-YPC Co., Ltd.    40
Zhangqiu Riyue Chemical Co., Ltd.    60
Taminco Lingtian (Nanjing) Fine Chemical Corporation    40
Luxi Chemical Group Co., Ltd.     100
Yuannan Yunwei Group Co., Ltd.    100
Total    1 110

   Reportedly, a 100 kt/a DMF project in Yankuang Yishan Chemical Co., Ltd. is currently under construction; another 100 kt/a DMF project will be built in Anda city of Heilongjiang province. It is obvious that there is overcapacity in China’s DMF industry.
   In recent years, with several new production units put into operation, the domestic DMF industry has surplus capacity and the competition in the industry has intensified continually. Although the industry is still growing overall, its growth rate is decreasing. China has transformed from a net importer of DMF to a net exporter. DMF products produced in China have strong competitiveness in the global market. China’s DMF production and consumption statistics from 2004 to 2012 are shown in Table 2.

Table 2 Production and consumption of DMF in China, 2004 to 2012 (kt, kt/a)
Year    2004    2005    2006    2007    2008    2009    2010    2011    2012
Capacity    270    370    524    815    830    850    1070    1170    1170
Output    247    320    395    480    540    580    685    699    720
Import volume    98.3    83.9    49.2    31.6    10.4    10.6    21.5    13.6    7.7
Export volume    25.9    38.7    40.3    52.7    90.0    68.7    84.2    94.9    96.9
Apparent consumption    319.4    365.2    403.9    458.9    460.4    521.9    622.3    617.7    630.8

II. Demand for DMF in downstream industries shrinks

In 2012, the total apparent consumption of DMF in China was 630 800 tons; consumption in the production of resins, pharmaceuticals, pesticides, electronics and dyes accounted for 62%, 11%, 8%, 6% and 7%, respectively. Consumption in the food additive industry has been increased significantly in the past two years and it accounted about 6% of the domestic total.
   DMF is mainly used in the resin industry. That used in the electronics industry accounts for only about 5% of the domestic total, while the ratio in the global market is about 30%. Therefore, the consumption of DMF in China’s electronics industry is expected to increase rapidly.
   The growth in the demand for DMF in China has slowed down in recent years for the following reasons. First, growth in downstream industries has been sluggish. Second, due to environmental protection and production costs, downstream enterprises began to recycle DMF. Last, in downstream industries such as acrylic fiber and spandex, in order to improve product quality and meet environmental requirements, enterprises gradually began to replace DMF with DMAC.

III. To recycle materials, save energy and develop substitutes for DMF

In recent years, with the increasing public interest in protecting the environmental, many enterprises have built DMF recovery units in order to save energy and reduce costs. Meanwhile, both the recovery technologies and the quality of recycled products have been improved. The DMF recycling ratios in downstream industries have increased continuously.
   However, impurities in used DMF cannot be completely removed during recovery. Since recycled DMF normally contain more impurities than fresh DMF products, the recovery of DMF is restricted, especially in areas requiring high-standard DMF. With the improvement of recovery technologies, the quality of the recycled products will be improved gradually. Thus the market of synthesized DMF will be impacted to some extent in the future.
   It now appears that DMAC can only replace DMF in several industries such as acrylic fiber and spandex. However, in the long run, the possibility of replacing DMF by some new high-performance eco-friendly solvent cannot be ruled out.

1. To replace DMF with DMAC
DMAC and DMF have similar chemical structures and overlapped application areas. In recent years, some of China’s spandex and acrylic fiber producers began to use DMAC to replace DMF as a solvent in order to improve the quality of their products. Although DMAC has advantages over DMF in terms of toxicity, environmental impact and effectiveness in improving the quality of spandex and acrylic fiber products, its application is constrained by its high price.
   The development of dry spinning spandex will be restricted for environmental reasons. In developed countries, dry spinning spandex has been banned from the production of underwear products which touch human skin directly, because the products contain trace amounts of solvent on their surfaces. In particular, in Europe, the United States and Japan, the dry spinning production process of spandex was completely banned and dry spinning units were either shut down or relocated to other countries. China also announced that the construction of new dry spinning spandex projects will not be approved.
   In the long run, the dry spinning process of spandex using DMF or DMAC as a solvent will be restricted in most countries. Although the process using DMAC as a solvent will continue to be used in China for some time, its development will be suppressed.
For China’s acrylic fiber industry, a growing number of enterprises will adopt the process using DMAC as a solvent in the future. Currently, there are three major processes to manufacture acrylic fiber – the two-step process using sodium thiocyanate, the one-step process using DMF as a solvent and the two-step process using DMAC as a solvent. Most new plants put into operation in China in recent years are using the two-step process using DMAC as a solvent.
   The dry spinning process using DMF as a solvent to manufacture acrylic fiber should not be developed in the future because the process has strict requirements on management, and it has high production costs. In addition, the acrylic fiber made by this process contains solvent residue, DMF, which is quite harmful to the environment and carcinogenic to human beings. DuPont has announced that it will no longer use the process to produce acrylic fiber.

2. Analysis of eco-friendly substitutes for DMF
The development of eco-friendly and economical substitutes of DMF has became a focus of attention within the industry. For example, water-soluble polyurethane resin can be synthesized from an aqueous solution. With the breakthroughs in the R&D of downstream products and the improvement of environmental standards of the industry, the gradual replacement of DMF by other eco-friendly and economic solvents will become the trend.
   However, the process will be neither quick nor easy. Various factors including technical feasibility, costs and manufacturing processes will be considered.

IV. Take precautions to expand application fields

China’s DMF industry has increased in scale, reduced costs and raised quality. The market competitiveness and QC of domestic products have been significantly enhanced, even in the global market. However, problems such as overcapacity, fierce competition, shrinking demand and limited application scope for substitutes of DMF should be taken seriously by domestic DMF producers.
   In order to reduce production costs, improve product quality and develop high-end products, DMF producers in China should complete the upstream and downstream of the industry chain, increase technical investments and expand applications of DMF. Meanwhile, they should put more emphasis on overseas markets and exports. Looking into the future, they should analyze the trend of the industry, develop substitutes of DMF, raise awareness of the risk of DMF being eliminated from the market, and plan in advance to cope with market changes.