By Jiang Shunping, China Carbide Industry Association

In the first half of this year, China's calcium carbide industry experienced unfavorable situations such as tight supply of raw materials, high inventory, obstructed export, price plummet and profit decline, large price fluctuations and losses of producers. It is predicted that the overall market of calcium carbide in the second half of the year will be better than that of the first half, the price will stabilize, and the industry's profit will be improved.

Production

China’s production of calcium carbide in June was 2.226 million tons, a year-on-year decrease of 5.8%. The cumulative output from January to June was 13.102 million tons, a year-on-year decrease of 2.3%. By the end of June, excluding 7 million t/a of long-term offline or semi-offline capacities, the actual effective calcium carbide capacity was 33 million t/a, with a total of about 110 manufacturers, and the utilization rate reached over 80%.
The coronavirus epidemic in the first half of the year had a serious impact on calcium carbide production. Xinjiang, Ningxia and Gansu, as large producing provinces of calcium carbide, experienced negative growth in cumulative production from January to June, falling by 2.3%, 2.5% and 14.5% respectively.
In the first quarter, under the influence of the epidemic, the market kept decreasing. In the second quarter, the prices of calcium carbide products rebounded to a certain extent, but overall situation fluctuated severely, and the average price was lower than the same period of previous years.

Upstream and downstream markets

1. Blue charcoal and lime
In the first half of the year, the prices of blue carbon were falling as a whole, down by RMB200/t. The prices of lime showed a steady and slight upward trend.
2. PVC
In the first half of 2020, the newly added PVC capacity reached 520 kt/a as Erdos officially commissioned two lines in January and April respectively, totaling 400 kt/a, and Hebei Cangzhou Julong Chemical started its 120 kt/a calcium carbide processed unit. Dezhou Shihua’s “JiangZhong” method mercury free 200 kt/a PVC line, Julong’s mixed method 110 kt/a line and Shaanxi Xinchuan’s 60 kt/a unit were delayed due to the pandemic.
The domestic PVC production in June was 1.631 million tons, an increase of 2% year-on-year, and the cumulative output from January to June was 9.688 million tons, a year-on-year decrease of 3.2%.
In the first half of 2020, the PVC market saw a "V" shaped trend. January was the off-season and the market price dropped slightly. Under the influence of the epidemic in March, end demand fell to a historical low, and PVC prices plunged precipitously in a short term. Driven by the supporting policy, it finally returned to normal levels in May.
The production will increase in the fourth quarter, but the market will not be under heavy oversupply pressure on the impact of centralized maintenance. Exports are expected to maintain a steady trend. With new capacity expectations and overall stable demand in the second half of the year, PVC prices will remain high in the third quarter, and fall slightly in the fourth quarter.
3. BDO
In the first half of 2020, the overall domestic BDO market prices showed a downward trend. The BDO output in the first half of the year was about 599 100 tons, down 2.6% from the same period last year. The second quarter witnessed low operating rates and significantly declined output. The lowest monthly output in the first half of the year was in June, at only 78 000 tons.
Affected by factors such as the covid-19 and the macroeconomic downturn, BDO downstream industry chain demand was sluggish, and exports were blocked. The end sector chemical fiber and shoe materials industries were significantly affected; the most important downstream field, PTMEG-spandex industry chain performed weakly, but its demand did not decline largely; the PBT industry started to plummet, leaving the industry in losses; the GBL industry exports were impacted seriously.
In the second half of the year, the BDO market will still be under pressure, as overcapacity still exists, and the downstream demand structure has no obvious improvement. It is expected that the industry will be running at a meager profit. It is estimated that the BDO prices in the second half of the year will be in the band of RMB7 500 to 9 000 /t, with a slow increase.
4. Vinyl acetate
In the first half of the year, affected by the coronavirus epidemic, the vinyl acetate market was bearish. The overall sluggish demand in downstream markets and end industries has put vinyl acetate in a stalemate, and most producers use it for co-production of polyvinyl alcohol. In the second half of the year, the epidemic situation stabilizes, downstream and end demand may increase, and coupled with the support of the high raw material prices and the shutdown of some units for maintenance, the market price of vinyl acetate may increase.

Industry profit

In the first half of 2020, the calcium carbide industry has maintained a stable operation in the face of a series of unfavorable factors such as rising raw material prices, sluggish downstream demand, sharp rises and drops in prices, and increasing pressures on safety and environmental protection. On the whole, more than 60% of the companies were making profits or at break-even points. In Inner Mongolia, Xinjiang, Shaanxi and Ningxia, calcium carbide producers with integrated upstream and downstream facilities and obvious resource advantages made profits. However, others in Shanxi, Gansu, Henan, Hunan, Hubei, Yunnan and Sichuan were on the verge of loss, forced to stop or limit production. The continuous changes in profitability in the first half of the year were mainly related to the fluctuations in the raw materials blue carbon and the selling prices of calcium carbide itself.

Forecast on the second half of 2020

From the perspective of calcium carbide supply: China now has about 33 million to 34 million t/a effective capacity and 5 million t/a non-competitive or internal combustion type capacities, to be transformed or eliminated soon. The additional 2 million t/a capacities, under construction now, are basically self-supporting and will not be put into production in the short term. Based on the current operating rates, the supply fundamental situation will not change significantly.
From the perspective of demand: the PVC lines are mainly shut for maintenance in the first half of the year, and it is predicted that the maintenance period will be shorter in the second half of the year. In addition, in the second half of the year, there will be 800 kt/a calcium carbide routed PVC plants resuming production. It is predicted that the demand for PVC will further increase in the second half of the year, and the overall product prices will be higher than that of the first half. As for other products such as vinyl acetate, BDO and lime nitrogen, the prices bottomed in the first half of the year, will begin to rise. With the increases of their operating rates, their demand for calcium carbide will further increase.
As for prices: the overall prices were in a downward trend in the first half of the year, hitting a new low in recent years. Driven by the rising feedstock prices and increasing demand from PVC, the calcium carbide prices in the second half of the year will be higher than that of the first half of 2020.