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Improving Competitive Power
The Route for Chinese Acetic Acid Producers
By Shao Shouyan, Xia Jingfeng - Jiangsu Sopo (Group) Co., Ltd.
Since the coming of overseas acetic acid giants and their increasing market share in China, the situation for Chinese domestic producers seems to be more critical, while excessive capacity and weak competitiveness are great troubles. What should domestic producers do to win the tough battle in acetic acid market? The following comprehensive analysis by Shao Shouyan and Xia Jingfeng from Jiangsu Sopo (Group) Co., Ltd. - the biggest local acetic acid producer - might provide the right answer. Current Status: continuous capacity stretching
Like most chemicals, the production of acetic acid in China has increased sharply in the last five years: 23% in capacity, 22% in output and 12% in apparent consumption. Authoritative data shows that in 2009 the capacity and output of acetic acid in China had reached to 4.7 million and 2.721 million tons per year, while the apparent consumption was up to 2.954 million tons which might be the fastest and best in the world. Respectively, in the first half of 2010, China has already produced 1.952 million tons acetic acid, and it was estimated that both output and consumption might exceed 3.5 million tons in accordance with expected 6 million tons capacity by the end of 2010. The main reason for this incredible growth is breakthroughs in acetic acid processing methods; in particular methanol
carbonylation became more popular as main force of acetic acid production. China currently has more than 20 acetic acid factories and Table 1 shows the top ten Chinese factories in acetic acid capacity in 2010. The breakthrough of processing method brought a rapid growth and wild expansion for Chinese acetic acid; nevertheless, the market tended to be more competitive under the pressure of declining product price, and some native factories found it tough to run the business and had to cut down operation scale. In 2010, the average operating rate of acetic acid plants in China just remained approximately 60% including 20% and 45% in those using oxidative fermentation and ethylene oxidation, but the operating rate of methanol carbonylation plants extremely increased to 70% which indicated the potential of innovated processing method. On the other hand, large acetic acid giants shows more ambition and interests to Chinese market, and most of them are trying to built new acetic acid plants or extend their current facilities, Table 2 is statistics of China new-added acetic acid capacity before 2015. Theoretically, the total capacity of China acetic acid would be able to approach to 9. 95 million t/a as long as all the plants shown in Table 2 go into operation on schedule. Anyway, by the end of 2015, the overall capacity of acetic acid in China will definitely exceed 8.5 million t/a even if uncertainty of new-added plants construction and exit of oxidative fermentation and ethylene oxidation.
Table 1 Top ten Chinese acetic acid factories in capacity in 2010
No 1 2 3 4 5 6 7 8 9 10 Company Jiangsu Sopo (Group) Co., Ltd. Shanghai Wujing Chemical Co., Ltd. Yankuang Cathay Coal Chemicals Co., Ltd. Celanese (Nanjing) Chemical Co., Ltd. BP YPC Acetyls Company (Nanjing) Ltd. (BYACO) Hebei Zhongxin Chemical Co., Ltd. Yangtze River Acetyls Company(YARACO) Henan Shunda Chemical Science & Technology Co., Ltd. Jilin Ji’an New Energy Group Company PetroChina Jilin Petrochemical Company Capacity(kt/a) 600 600 600 600 500 500 350 300 210 210 Processing Methanol Carbonylation Methanol Carbonylation Methanol Carbonylation Methanol Carbonylation Methanol Carbonylation Methanol Carbonylation Natural Gas Methanol Carbonylation Methanol Carbonylation Oxidative Fermentation Ethylene Oxidation
CHINA CHEMICAL REPORTER February 21st, 2011
Yangtze River Acetyls Company (YARACO) Chongqing Wansheng Coal Chemical Co. obviously it needs a procedure. To t a l Source: CCR CHINA CHEMICAL REPORTER February 21st.. Currently. but the cost of acetic acid from coal (the means used by over 70% Chinese acetic acid factories) approaches RMB2200 per ton. Henan Longyu Coal Chemical Co. Huaibei Coal Mining Group Henan Yima Shengyuan Chemical Science & Technology Co. Ltd. which shows the potential imaginaTable 2 Statistics of China new-added acetic acid capacity by 2015 tion of Chinese acetic acid Company Capacity Available for makers. the whole acetic acid industry tended to be out of order..2 million market downturn. which must be the root cause of the current downturn. domestic acetic acid generally has little cost advantage. but interestingly. Ltd. Celanese nese traditional methanol carbonylation Chinese acetic acid industry and the market . Jiangsu Sopo (Group) Co. Ltd. Ltd. which has obvious advantage in cost and is able to bring considerable profit for producer.Most overseas acetic acid giants use natural gas as raw material to produce acetic acid. However.. the excess capacity of acetic 2010. Ltd. as the increasing imports in the first half of 2010 confirmed. Ltd. CN Analysis: downturn of Chinese acetic acid industry History of Chinese acetic acid market 2005-2007 . 2011 14 . and it is worth pay(kt/a) Production ing closer attention.compared to Chidownturn still had a serious impact for the financial crisis in 2008 still exists. Shandong Heze Fu-Hai Energy Development Co.. which resulted in a very low The excessive capacity gave huge impact to operating rates and even shutting down acetic acid market. 600 200 400 400 400 200 300 650 200 3950 2012 Undetermined 2012 2012 2012 2011 2011 Before 2015 Before 2015 Disorderly capacity expansion The root cause leading to the acetic acid downturn in China is disorderly capacity expansion. but the capacity will spontaneously accord with demand evenfactories. while the demand for acetic acid will just rise 1 to 1.Organic WWW. 2010-2011 : In 2010. and the import price is no more than RMB1600 per ton. and supply came to exceeded demand by quite a bit within five years. 600 Q2 2011 Celanese (Nanjing) Chemical Co. Ltd. to staring-up of new larger acetic acid plants. and the gap had to be filled by import.. Domestic factories: weak competitive power Raw materials . Ltd. CCR. in the presence of acetic acid in. COM.5 million tons production and downstream products in the be not able to keep pace with supply due per reactor from the current 1.. Yankuang Cathay Coal Chemicals CO. global economic t u a l l y b y t h e i n f l u e n c e o f m a r k e t took a turn for the better and it seemed to adjustment. which has obvious advantage in cost compared with oil and coal.5% more than the Asian GDP increase in the next few years.The Chinese market had a strong demand for acetic acid while domestic supply was unable to meet. and this circumstance will last until 2014 when the pressure might be relieved for up to 70% capacity. which improved methanol carbonylation to some extent.. therefore acetic acid price remained high in a fairly long period. the two-year of industry recovery because the impact of Production technology . Nevertheless. Therefore. the cost of acetic acid from natural gas ranges from RMB1100 to RMB 1200 per ton. bring a new life for Chinese acetic acid However. some Chinese coal enterprises tried their best to build up more acetic acid plants with the purpose of higher profits. Chinese acetic acid producers market. Chinese acetic acid industry recovery market was badly hurt and the price of acetic acid slumped in the situation of increasing capacity. Since oil price were rising from 2005. 2007-2009 : From 2007 that global fiFinancial crisis postpones nancial crisis started. foreign the next few years. Respectively. to apply coal based methanol carbonylation in acetic acid production. and it is expected that excessive ca. acid still troubles Chinese producers and pacity may trouble all the Asian market in Celanese said its improvement of AOPlus the government. Celanese also said that technology would increase acetic acid cagiants reinforce the investment of acetic acid the demand for acetic acid in Asian would pacity and be able to bring 1..have to be more patient to wait the coming dustry recovery. multinational acetic acid corporaturned to be more depressed after few considered that the rise of demand in the tions own strong technology background Asian acetic acid market slowed down in and their acetic acid plants perform fairly months' recovery.the world's leading acetic acid producer plants. most acetic acid producer could not afford the high cost of oil and turned Yunnan Yunwei Group Co. In consequence. and foreign acetic acid giants also joined the competition for market share.well in production scale and product quality.
the first thing to do for domestics is to build up a healthy market environment. Besides fast growth in the Chinese market. but the industry concentration and depth of the industry chain . to some extent. 2. Chinese producers currently have no advantage in global resource integration and what they could do is to rely on domestic producers. . Overall. Build up a full information collection system The current excessive capacity in China has strong relationship with a shortage of information collection. the overseas competitive power will give much more pressure to Chinese acetic acid industry. So. Integrate resources The purpose of resource integration of Chinese acetic acid producers is to build up a few giants in the industry. and domestic producers could pursue them in a short period. which take approximately 30% of domestic capacity in China. in particular.biggest domestic acetic acid producer updated original two acetic acid plants and each plant currently has an annual capacity up to 600 000 tons.with the addition of new plants and extension of current plants. a strong innovation team and comprehensive market structure. The paths to be powerful The analysis above indicates the coming of tougher competition in China's acetic acid sector. and initially realize domestic resource integration and before extending to the international scene.still need to be refined. even being a giant domestically. and then certainly they lose the chances to know what their competitors doing. The same as Celanese. This being the case. the coming of overseas downstream products will be a great threat for domestic producers.the global leader has numbers of high profit downstream products as a basis of its competitive power. talents and funding. Therefore. Resource integration . which enables local acetic acid factories to grow and get stronger. funding. Once this technology was put into operation. southwest China. On the other hand. vinyl acetate monomer (VAM) and ethylene latex. and current acetic acid producers each have regular market share. the industry chain of acetic acid in China has basically become fully formed. the capacity of Chinese acetic acid has sharply increased and the gap between overseas and domestics in production scale seems to be much smaller in the last few years.5 million t/a before 2015. Multinational acetic acid companies such as Celanese are predominant in technology. owning core technology could guarantee local producers to win the competition in spite of multinationals' huge investment and long history of development. the potential of resource integration of Chinese producers can be pursued with confidence because it has succeeded in other chemical industries. the situation in China allows most domestic acetic acid producers to integrate separate resources or bring other advantages to bear. Ltd. CN tons. management and market and it is believed that the integration of resource enable to maximize resource utili- zation and improve enterprise efficiency.It is considered that the Chinese acetic acid market has attained a balance of production and consumption. CCR. 2011 .Over the years. However. industry chain. Chinese acetic acid factories now are trying to extend production scale to improve competitiveness. they use the global resource to join the game in China. 3.Organic WWW. In that case. people. COM. Celanese . Therefore. According to officer statistics. For example. technology. which might be the easiest and fastest way to improve competitive power of locals. the total competitive power of domestics would be improved greatly. eventually increasing the competitive power of the company. it is necessary to have a comprehensive information system to collect all the information around the world. 1. Jiangsu Sopo (Group) Co. it would be a good time for domestic producers to change their thinking style. which is the foundation of competitive power. Market . which still has potential to be 1 million tons. Theoretically. the original impetus for overseas giants to invest in China is their well developed technology in downstream products which enable them to be more confident in products sales rather than being concerned in excessive capacity. most 15 CHINA CHEMICAL REPORTER February 21st.the concept of resource in acetic acid industry involves raw materials. acetic acid industry development and innovation of new products. which is considered to be the first one in the world and has capacity to produce acetic acid. all of which must be taking the fastest routes to win the competition. the total capacity of BP and Celanese might be able to reach 2. Jiangsu province. and might be able to cope with Celanese and BP. the suggestion for domestic producers is to investigate the potential market and try to develop new acetic acid products rather than just keep eyes on current fixed market. In face of competition. such as Celanese and BP. In the international market. Obviously. and now the firm is building an acetyl production base in Nanjing. Downstream products . Chinese producers just put head down for production and have no international horizon. Invest in R & D Strong technology background is the core of a powerful company. who have a full R&D team and numerous technology centers. the overseas acetic acid giants in China has global raw materials network..which cannot compare with the multinational giants . Chinese producers need to pay closer attention to new demand markets those are currently growing fast because the current international market has been fixed and also stable in supply and demand in a quite long time. The following points will be the tips for local producers to learn in the next few years. Production scale . in other words. BP is also trying to realize its dream of an acetic acid base in Nanjing and Chongqing.
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