Backward Capacities Will Be Further Washed Out from POM Industry
Click:0    DateTime:Aug.23,2022

Gao Yajie, JLC

Paraformaldehyde (POM) is a downstream product of methanol, which belongs to one of the five major engineering plastics and is able to replace metals in a wide range. By different polymerization monomers, POM is divided into homopolymeric formaldehyde and copolymeric formaldehyde. Due to the small consumptions of raw materials, less demanding processing and molding conditions than homopolymer formaldehyde, less pollutant emissions, easy control of polymer molecular weight and properties, and adjustable grades, copolymer formaldehyde is widely used and is the main development direction of POM. At present, all POM products in China are copolymer formaldehyde routed, including Poland’s ZAT technology, Fu Yi technology from Hong Kong, China and Korea’s P&ID technology. This article addresses copolymer formaldehyde.

Supply-demand of polyformaldehyde industry

China’s POM R&D starts in 1950’s, with backward technology and small scale. Most of the domestic products are low-end, with about 300 000 tons of high-end imports each year. The capacities from domestic producers are 370 000 t/a and those from the two JVs are 80 000 t/a. See Table 1 for details. 

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Producers are stopping making low- and mid-end products, and China's low- and mid-end goods will gradually go to the global market. From the statistics of China's POM exports in recent years, the exports to the Middle East and ASEAN countries starts to increase significantly in 2022 (Chart 1). Compared with the data in 2021, the exports to Turkey in January-April 2022 increased by 4%, the shipments to Vietnam by 5%, and those to Russian Federation, Iran, and the United Arab Emirates all rose (Chart 2).

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Chart 1 China’s POM exports, 2018-2021

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Chart 2 Chinas’ POM exports, Jan-Apr 2022

China’s POM market demand is weak at present, and the downstream is not interested in high prices products. Oversupply casts pressure on distributers and downstream producers. In addition, the traditional off-season is approaching, and the market demand will further weaken, which won’t be relieved by temporary shutdowns on maintenance (Table 2).

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In order to ease the high import dependency, Chinese government has adopted a series of measures to encourage the development of the domestic POM industry. As formaldehyde is the important feedstock of POM, the large-scale industrialization of methanol facilities is crucial to the positive development of China's POM industry. In terms of trade flow, POM end users will be concentrated in coastal areas. Jiangsu, Zhejiang and Shanghai have the most complete plastic applications in the country and a cluster of electronics and electrical appliances in East China. Dongguan has a large plastic raw materials market. Guangzhou has an automobile and motorcycle manufacturing base. Foshan has smooth plastics distribution. Fujian is a world-class production base of toys, sanitary ware, and clothing accessories. The industry distribution is highly concentrated.

POM market analysis

Since the second half of 2020, anti-dumping policy becoming favorable, along with strong supply-side support and the industry speculation stimulated the POM market increasing, with the mainstream prices all the way to new highs. However, the recent market is consolidating down (Chart 3).

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Chart 3 China’s POM market prices, 2020-2022


China’s POM applications

Paraformaldehyde is mainly used in electronic appliances, daily goods, automobiles, industrial machinery and consumables.

The automobile industry is the one with the fastest growing demand for POM and the greatest potential for the future. China's automobile industry has been steadily developed, and automotive plastic products have been changed from general decorative parts to structural and functional parts. Automotive modified POM is developing towards the direction of having higher strength, better impact resistance, higher performance, being high-performance composites and plastic alloys. Accelerating the development of high-performance automotive-specific POM products, can expand the applications and promote the development of China's entire automobile industry.

POM consumers are mainly located in East China and South China, of which Zhejiang has China's largest plastics distribution center, with a collection of the country's most complete plastic application industries, Jiangsu and Shanghai are equipped with most of electronic appliances and other high-end industries of East China, and Dongguan is the main plastic raw material distribution circulation area, with three large plastic raw material markets and large demands from surrounding areas; Shenzhen has a developed electronics industry, whose impact on POM consumption demand is great; Guangzhou has world-class home appliances and sanitary ware as well as cars & motorcycle manufacturing base; Foshan is strong in plastic distribution; and Fujian has world-class toys, sanitary ware, and clothing accessories production base. There are some small and medium-sized POM markets in northern China, due to the short transport distance, some cost advantages, and being close to the port. 

China’s POM development trend

China's new materials industry development plan focuses on improving the performance of wide temperature resistance, high impact resistance, anti-aging, high wear resistance and easy processing. It will strengthen the modification and processing application technology research and development, expand domestic production, and enhance the capacity of high-end varieties as soon as possible. It will also accelerate the development of polycarbonate (PC), POM, polyamide (PA), polybutylene terephthalate (PBT), polyphenylene ether (PPO) and polyphenylene sulfide (PPS) to expand the scope of applications and improve self-sufficiency.

China’s POM market has a bright future, and the demand will further expand with the development of automobile and electronics & electrical sectors.

China has many POM projects, with the new capacity up to 1.04 million t/a, more than twice of the existing capacity and mostly concentrated in coal origin, such as Xinjiang and Inner Mongolia. Domestic low-end products’ competition will become more intense, and some suppliers have thus shifted focus to high-end market to ease the competitive pressure. With the increasing supply of high-end POM grades, as well as the maturity of POM modification technology, domestic POM goods are expected to replace the imports.

Since the Regional Comprehensive Economic Partnership Agreement (RCEP) officially entered into force on January 1, 2022, significant benefits have been brought to the automobile parts industry, which might boost the sluggish POM market. POM exports are expected to improve in the future.

China's POM apparent consumption is growing year by year. The main reasons are: 1) the exports of parts made from POM has driven the domestic consumption. According to statistics, among China's imports of POM, the proportion of incoming material processing has increased year by year, while the general trade is less than 30%. 2) POM applications have been gradually the same with the international market, accelerating the increase in domestic consumption. In the past two years, with the rapid development of automotive, construction, household appliances, agricultural irrigation and other downstream industries, the domestic POM resin consumption markets expanded. The emerging new downstream like automotive is pushing up the consumption.

     In summary, the expansion of POM capacity will increase the competitive pressure. The de-capacity and supply-side structural reform will promote the elimination of low-end backward capacities and further accelerate the pace of development of high-end POM capacities, develop more room for POM in electronics and electrical appliances, make breakthrough in automotive industry, and push the POM industry to a higher level of development.