By Jiang Shunping, China Carbide Industry Association

Industrial performance better than anticipation in 1H

In the first half of 2018, the overall economic operation of China’s calcium carbide industry was better than expected, the market was stable, the prices were stable, and the profits continued to improve. However, under the increasing pressure on environmental protection, the calcium carbide production enterprises had also been impacted to some extent. The procurement of raw materials for production became difficult, and some calcium carbide enterprises failing to meet the environmental protection standards were forced to stop production or shut down permanently. The state will further strengthen the management of the transportation of hazardous chemicals, and at the same time, the issuance of standards on calcium carbide products in the year will inevitably increase the production cost of calcium carbide enterprises.
   The downstream PVC industry enjoyed healthy development in the first half of the year. However, according to the statistics of China Carbide Industry Association (hereinafter referred to as the “Association”), more than 7 million t/a of calcium carbide capacities were offline, and there are also another 2 million t/a capacities under construction or in the plan. The problem of oversupply will not be solved in the short term. During the year, there will be about 500 kt/a of PVC capacities put into production successively. It is predicted that the market prices of calcium carbide will continue to be lingering in the band of RMB 2 900-3 000/t.
   According to the statistics of the Association, China’s calcium carbide production reached 14.2 million tons in the first half of the year, which was basically the same as last year. See Table 1 for details.

Table 1   Top 10 calcium carbide producing areas in 1H 2018 (ton)

The industry still faces multiple pressures

   1. Pressures from energy, resources, safety and environmental protection
   Due to insufficient capital investment, some medium and small sized calcium carbide enterprises have not adopted environmental protection technologies such as purification ash incineration.
   2. Excessive capacity
   As of 2017, the national calcium carbide capacity was 42 million t/a, and about 8-9 million t/a lines are idled despite the good performance of PVC industry. Coupled with over 2 million t/a capacities under construction, the oversupply problem will be more severe.
   3. Over-reliant on PVC
   In recent years, China’s calcium carbide industry has made certain achievements in broadening the downstream sectors, such as vinyl acetate, lime nitrogen and BDO. However, as affected by the downward trend of the macro economy and the slow growth of end demand, the growth of the previously mentioned markets is not big enough to support the calcium carbide industry.
   4. High cost
   Most producers are still reluctant to install the semi-automatic or fully automatic tapping machines because of the high cost, and huge safety risk exists due to manual operation. It is necessary to accelerate the development of the tapping process from mechanization to fully automated and intelligent routes, encourage enterprises to implement automation project transformation, and strive to make greater breakthroughs in automatic measurement of electrode length and automatic integration of aging and heat recovery.

Capacity expansion enters the bottleneck period

   China’s calcium carbide is mainly used in the production of PVC, whose consumption of calcium carbide accounts for about 80% of the total. The demand from BDO, lime nitrogen and its derivative calcium carbide accounts for 15%, and the other 5% is consumed by VAC.
   1. PVC
   Among the domestic calcium carbide consumption structure, PVC has occupied an absolute dominant position. In recent years, the consumption ratio has been stable at around 80%. China’s situation of being rich in coal and short in oil and gas has promoted the rapid development of the calcium carbide routed PVC and the continuous expansion of its capacity.
   In recent years, the expansion has slowed down, and more and more capacities have been eliminated from the market. China’s PVC capacity in 2017 totaled 24.06 million t/a (including 1.37 million t/a of PVC paste resin). There was 1.08 million t/a newly added capacities and 280 kt/a capacities were shut down permanently.
   2. VAC
   In 2017, domestic vinyl acetate production was about 1.9 million tons, an increase of 12.27% compared with last year, and the operating rate of the industry was around 70%. In the same year, the output of calcium carbide routed VAC was 1.23 million tons, accounting for 65% of the total output, and the demand for calcium carbide was about 1.2 million tons.
   3. BDO
   In 2017, the output of BDO was about 1.3 million tons, the proportion of acetylene routed was 73.1%, and the demand for calcium carbide was about 1.1 million tons. The addition of 60 kt/a of BDO capacity in Shaanxi Ronghe has increased the demand for calcium carbide.
   4. Lime nitrogen
   At present, there are more than 20 lime nitrogen production enterprises in China, of which more than 60% are concentrated in Ningxia. The total production capacity of the country is about 2 million t/a. In addition to a small amount of exports, most of the products are used for the making of raw materials of dicyandiamide, thiourea, Carbendazim, chlorothalonil and monocyanamide. Some are directly used as nitriding agent, desulfurizer and agricultural fertilizer and fertilizer slow release agent. In the past three years, the operating rate has remained at around 60%.
   After rapid expansion, the development of domestic calcium carbide industry capacity has entered a bottleneck period, while the downstream consumption structure is gradually fixed, and the growth space of PVC is limited. So, the general direction of the development of calcium carbide industry should be the structural adjustment.
   Looking forward to the second half of 2018, investment in the calcium carbide industry will be slowed down, and less than 500 kt/a will be put into operation before the end of the year. The total capacity of calcium carbide will reach a record high of 28 million t/a, with an increase of 3%. The market prices of calcium carbide will be fluctuating, but better than that of the first half of the year, and the operation of the industry will stabilize and rebound.
   It is predicted that there will be no major changes in the demand and consumption structure of calcium carbide market in 2018, and the output will remain flat or have a slight increase. According to the statistics of the chlor-alkali association, there will be 1.76 million t/a additional capacity of PVC, leading to a 2 million ton’s demand growth for calcium carbide.
   Since the third quarter of 2017, the price of calcium carbide has been returning to a rational level, and the profits of enterprises have improved significantly. The industry as a whole has turned into a profit-making situation, especially in the first quarter of 2018. It is predicted that the price of calcium carbide will maintain a stable trend in the whole year, and the mainstream price will remain at RMB2 800-3 000/t.