Calcium Carbide Sector Enters Intensive Restructuring Period

By Yang Chuanwei, Secretary-General of China Calcium Carbide Industry Association

Development of the calcium carbide sector turns better

1. Capacity & output both grow steadily

By the end of 2016 there were 220 calcium carbide producers in China, capacity was 45.00 million t/a and output was 27.30 million tons, according to statistics made by China Calcium Carbide Industry Association. When an invalid capacity of 12.00 million t/a, either idle or in intermittent production for several years is deducted, the overall operating rate of calcium carbide units was 83%. The capacity of closed calcium carbide furnaces with an advanced level of technology, equipment, energy conservation and emission reduction was 37.53 million t/a and its proportion in the total capacity had gone up from less than 10% in 2000 to 84% in 2016. The proportion of internal combustion calcium carbide furnaces came down to 16%.

2. Industrial concentration keeps going up

A number of large enterprise groups with prominent advantages such as Xinjiang Zhongtai Chemical (Group) Co., Ltd., Xinjiang Tianye (Group) Co., Ltd. and Erdos Chemical Group Co., Ltd. have emerged in the calcium carbide sector. According to statistics made by China Calcium Carbide Industry Association, the number of calcium carbide producers in China declined by 130 between 2010 and 2016. Meanwhile, average capacity and average output of producers more than doubled. Output of the top 10 producers in terms of capacity was over 12.00 million tons in 2016, accounting for 45% of the national total.

3. Capacity distribution rationalized

It is more and more evident calcium carbide capacity is being concentrated in central and western regions with rich coal resources, abundant power supply, vast territory and sparse population. The total capacity of calcium carbide in six such regions – Xinjiang, Inner Mongolia, Ningxia, Shaanxi, Henan and Gansu – was 36.00 million t/a in 2016, an increase of 18.96 million t/a over 2010. The proportion in the national total reached 80%, or 10 percent points higher than in 2010.

4. Technology/equipment is constantly upgraded

Dissemination and application of large closed calcium carbide furnaces has promoted the technology/equipment level in the calcium carbide sector in recent years. 40500KVA closed furnaces have become the first choice for new calcium carbide projects, on the strength of advantages such as excellent performance, well-developed technology/equipment and stable functioning. The technical level of facilities matched to closed furnaces such as flue gas purification units, gas-fired lime kilns and automatic control systems has also been drastically upgraded. The new regenerative calcium carbide production process has already been put in operation, and a foundation for diversification of calcium carbide process routes is laid. Successful use of discharge robots and dischargers has greatly promoted the automation level and the safety coefficient in the calcium carbide production.

5. Energy conservation & emission reduction see prominent achievements

The average comprehensive energy consumption per ton of calcium carbide (equivalent to a standard gas production rate of 300 L/kg, the same below) came down from 1 052 kg of standard coal in 2011 to 1 006 kg of standard coal in 2015. In addition to using flue gas in lime burning, power generation and carbon baking, the capacity of using flue gas to produce chemical products already accounts for 11% of the total capacity of closed furnaces.

Capacity growth has slowed down as investment has become more rational

1. Petroleum & chemical industries have shifted from rapid growth to restructuring

In the petroleum and chemical industries in China, the growth of main-business revenue dropped to 1.7% in 2016, the growth of fixed-asset investment was -5.9% and the growth of profit was 0%. The industrial system for large-volume petrochemical products and basic chemical raw materials is already well developed, and the structural capacity surplus has appeared. Investment has shifted from traditional sectors toward emerging sectors such as chemical new materials and high-end specialty chemicals. The growth of industrial added value in specialty chemicals, pesticides and synthetic materials was respectively 10.8%, 10.8% and 10.0% in 2016, holding first places in the chemical industry. The growth of the main-business revenue in both specialty chemicals and synthetic materials was 7.6%, also holding a leading place.

2. The crude oil shortage has worsened, and coal chemical industries such as calcium carbide have become prominent

The proven recoverable crude oil reserves in China amounted to 3.5 billion tons in 2016, and output was around 200 million tons. To satisfy domestic demand for petrochemical products, import of crude oil increased from 138.84 million tons to 381.04 million tons during 2006-2016, with an average annual growth of over 11%. Import dependence also went up from 43.1% to 65.9%. Moderate development in the coal chemical industry such as calcium carbide can therefore ease the crude oil shortage and help ensure sustainable development of downstream sectors.

3. Innovative consumption modes such as “One Belt One Road” strategy and soil amelioration bring about new development opportunities

Countries along “One Belt One Road” have a great population, the demand for petrochemical and chemical products has a huge potential and there is a considerable space for capacity growth. With sustained implementation of the “One Belt One Road” strategy, more enterprises will go out of the country to make investments and set up businesses overseas.
Calcium contained in lime nitrogen can effectively improve soil and limit its acidification. To slow worsening soil acidification in China, 10.00 million tons of soil conditioners will be needed each year. Lime nitrogen can also reduce cadmium pollution and control schistosome. Large-scale use of lime nitrogen as fertilizer and pesticide will greatly stimulate calcium carbide consumption.
The PVC sector, which consumes 80% of all calcium carbide, is actively innovating in market consumption. PVC building templates have already been developed. Such templates have advantages of excellent performance and long service life, and are hoped to replace traditional timber templates in the construction sector. If PVC takes 30% of timber templates’ market share, PVC demand will increase 10.00 million tons. Calcium carbide consumption would then be 14.00 million tons higher, greatly remedying serious capacity surplus in the calcium carbide sector.

Development of the calcium carbide sector faces challenges

1. Capacity surplus is aggravated

A large number of calcium carbide plants have been launched in major coal producing regions such as Xinjiang, Inner Mongolia, Shaanxi and Ningxia in recent years. Capacity in China increased 3.80 million t/a a year on average during 2010-2016, but the increase of output was only 1.80 million tons a year on average. The capacity surplus is therefore aggravated, leading to a drastic price drop. The average price of calcium carbide (delivered to clients) in 2017 came down from RMB3 200/t in January to RMB2 800/t at the beginning of June. It is expected that firms’ operational difficulties will remain high in the second half of the year, so enthusiasm for further investments will be cool down and startup of some future plants will be postponed.

2. Prices of raw materials increase steadily

Labor costs, financing costs, logistics costs, environmental protection costs and raw material costs of calcium carbide producers have all been high since the end of 2016. The price of raw material blue carbon has reached RMB780-820/t, double the prices of the beginning of last year. The price of lime is RMB100-150/t higher than the price at the beginning of last year. The cost of power used in calcium carbide production accounts for nearly 70% of the total cost. The direct cost alone in producers in Sichuan, Shanxi, Hunan and Yunnan has reached over RMB2 950 per ton of product (excluding equipment depreciation and tax). At a time when the ex-factory price of product is only around RMB2 900/t, calcium carbide producers can hardly make both ends meet.

3. Dependence on the PVC sector is too high

Despite a great variety of downstream products for the calcium carbide sector in China, consumption of calcium carbide in making PVC by the calcium carbide process took 70% of the total in 2016. Dependence of the calcium carbide sector on the PVC sector will likely remain quite high. PVC producers in China have heavily depended on export for many years. A powerful backing to the calcium carbide market can hardly be formed. The production and operation of calcium carbide producers and the sound development of the entire calcium carbide sector are therefore affected. It is therefore imperative for the calcium carbide sector to expand application sectors, optimize/upgrade consumption structure and reduce dependence on the PVC sector.