where is the way out for af amid the slow economic growth?€¦ · world economy is struggling...

Where is the way out for AF amid

the slow economic growth?

Bo Guangming

Deputy Secretary General

China Chemical Fibers Association

11th China International Acrylonitrile & Acrylic Fi ber Forum

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Where is the Way Out for AF amid the Slow Economic Growth?

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Where is the Way Out for AF amid the Slow Economic Growth?

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Current global macro-economic environment

Status quo of China chemical fiber and AF industry

Factors influencing AF industry

The way out for China AF industry


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ⅠⅠⅠⅠ. Current Global Macro-economic Environment

� World economy is struggling towards recovery

� China’s economy is facing strategic opportunity

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Status quo of Economy in Developed Regions

EU: struck by debt crisis

Japan: seeking reform in plight

The U.S.: in slow recovery


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World Economy is Struggling towards Recovery

� U.S. economy recovers slowlyWorld economy has been gradually struggling towards recovery since outbreak of economic crisis in 2008. As the largest economic giant in the world, the U.S. owns solid high-tech foundation and high enterprise creativity despite its feeble economic growth. With the progress in expansion on export proposed by American government, the U.S. is expected to be the largest oil exporter in the world by 2017.

� EU is deeply struck by European debt crisisIn recent years, EU has faced with slow development of economy. While the UK still refuses to enter into Euro zone, Greece has already been out of it. There is no reversion in debt crisis. Would Germany and France be dragged down? The crisis is still a major issue in the Europe.

� Japan seeks for economic reformAfter nearly 20 years of gloom, Japan’s international competitiveness has declined significantly. The long-term unfriendly relationship with nations in East Asia also dragged down its economy, which promoted the birth of its hard-line policy. Maybe it’s a long way to go for the economic reform if Japan continues to pursue Yen currency war.

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China’s Economy is Facing Strategic Opportunity

� During the 12th Five-year Plan period, China faces a bottleneck for the economic growth after nearly 30 years of rapid development, with the growth in economy slowing down. In Q3 2013, Chinese government issued 8 measures to promote economic development and realize steady growth, which stimulated China’s economy vitality, with GDP growth in 2013 as high as 7.7%. As other economies in the world were gradually out of crisis, Chinese government is more determined to keep economic growth stable than ever. With the potential to keep medium-speed growth for a long time, Chinese economy still faces an important strategic opportunity.

� There is domestic and overseas demand in most countries in the world, but China is lack of domestic demand and heavily depends on overseas market. The increase in total retail sales of social consumer goods continued to drop on a year-on-year basis. As the weakening US dollar puts pressure on bulk commodity and RMB continues to be firmer, the purchase cost for bulk commodity for Chinese enterprises declines significantly. Given the large population, the domestic demand will be impressive as long as the expansion on consumers’ demand is realized.


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ⅡⅡⅡⅡ. Status quo of China Chemical Fiber and AF Industry

� Chemical fiber is one of the important raw materials in textile industry and is also important for Chinese textile industry, accounting for 73% of mill consumption of textile fibers. As an important basic raw material, chemical fiber covers the industries of aviation, national defense, automobile and medical care. Meanwhile, changes in state economy affect chemical fiber through the influence from textile industry, and the technology progress in chemical fiber also influences many other fields through end-users’ products.

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Status quo of China Chemical Fiber Industry

1. Total Chemical Fiber Production Continues to Rise

Table 1 Productions of Chemical Fiber by Variety in China in 2013

Source: NBS

Variety 2013 (kt) 2012 (kt) Year on year (%)

Total 41,219.4 38,201.5 7.90

Cellulose Fiber 3,904.1 3,334.8 17.07

Synthetic Fiber 37,315.3 34,867.6 7.02

Polyester Fiber 33,406.4 31,326.3 6.64

Nylon Fiber 2,112.8 1,879 12.44

Acrylic Fiber 694.3 691.3 0.43

PVA Fiber 100.9 87.1 15.83

PP Fiber 264.3 272.5 -3.02

Spandex 389.7 306.1 27.31


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2. The Growth Rate of Chemical Fiber Production Slows Down

� Chemical fiber industry developed rapidly during the 10th and 11th Five-year Plan period in China and now it is paying more attention to quality than quantity. Since the global financial crisis broke out in 2008, the industry kept two-year increase before the growth declined gradually in recent years. In 2013, due to structure reform and muted market condition, the growth rate of chemical fiber production even stayed at single digit.

Chart 1 The Growth of Chemical Fiber Production in 2008-2013

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3. Chemical Fiber Imports Slightly Increased in 2013

Table 2 Chemical Fiber Import in 2012 and 2013

Sources: the General Administration of Customs in China

Import Volume (kt) Import Value (million $)2013 2012 Y-on-Y (%) 2013 2012 Y-on-Y (%)

Chemical Fiber 871.7 821 6.17 3209 3077 4.31

PFY 110.2 120.4 -8.51 354 340 4.19PSF 128.5 112.4 14.33 242 211 14.43

Nylon Filament 161.6 164 -1.48 679 666 1.95Acrylic Fiber 212.1 186.5 13.71 668 592 12.7

VFY 8.7 9.8 -10.42 74 71 4.78VSF 157.4 145.6 8.14 427 479 -10.84

Spandex 20.2 18.8 7.48 203 173 16.95


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Table 3 Chemical Fiber Export in 2012 and 3013

Sources：the General Administration of Customs in China

4. Chemical Fiber Exports Increased Slightly in 2013

Export Volume (kt) Export Value (million dollar)

2013 2012 Y-on-Y (%) 2013 2012 Y-on-Y (%)

Chemical Fiber 2679.7 2468.1 8.57 6233 5974 4.35

PFY 1292.2 1078.9 19.78 2518 2136 17.85

PSF 733.7 670.7 9.41 1014 973 4.3

Nylon Filament 136.6 116.2 17.52 562 518 8.49

Acrylic Fiber 9.4 5.8 62.29 31 18 69.82

VFY 81.9 76.5 7.01 484 488 -0.68

VSF 180.6 269.1 -32.87 353 576 -38.8

Spandex 46.7 44.1 5.83 330 296 11.68

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� 5. Chemical Fiber Export in 2012-2013

Chart 2 Chemical Fiber Export Growth Rate in 2012-2013

-40%

-20%

0%

20%

40%

Jan12 Mar May Jul Sep Nov Jan13 Mar May Jul Sep Nov


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6. Less Imports of Intermediates for Synthetic Fibers in 2013

Table 4 Import of Major Intermediates for Synthetic Fibers in 2013

Sources: the General Administration of Customs in China

Import Volume (kt) Import Value (million dollar)

2013 2012 Y-on-Y 2013 2012 Y-on-Y

Synthetic Fiber

13,495.2 16,051.1 -15.92 17,608 20,633 -14.66

MEG 8,237.8 7,940.3 3.75 8,702 8,144 6.85

PTA 2,743.4 5,365.1 -48.87 2,988 5,863 -49.03

PET chips 213 207 2.87 407 377 7.96

CPL 452.9 706.5 -35.9 1,076 1,814 -40.86

PA chips 913.6 849.7 7.52 2,848 2,754 3.42

AH salt 9.6 9.9 -2.78 21 25 -16.3

ACN 547.6 555.4 -1.42 983 1042 -5.58


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Table 5. Profit of Chinese Chemical Fiber Industry in 2013Unit: million dollar

Total Profit Loss

2013 2012 Y-on-Y (%) 2013 2012 Y-on-Y (%)

Chemical Fiber 25,978 21,967 18.26 4,543 5,008 -9.28

Cellulose fiber 7,531 5,740 31.2 1,345 1,657 -18.86

Nylon fiber 3,968 3,272 21.26 161 199 -19.36

Polyester fiber 10,572 10,907 -3.07 2,142 1,657 29.30

Acrylic fiber 23 -53 - 47 152 -69.44

PVA fiber 26 -145 - 32 186 -82.98

PP fiber 291 315 -7.75 27 23 15.61

Spandex 1,911 434 340.06 144 611 -76.43

Other synthetic fibers 1,104 748 47.62 306 270 13.53


7. Profit of Chinese Chemical Fiber Industry in 2013


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Status quo of China Acrylic Fiber Industry

1. AF Capacity, Production and Demand Slowed Down in China

Chart 3 AF Production and Demand in China in 2003-2013 (kt)

0

200

400

600

800

1000

1200

1400

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Production

Demand

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2. China and World AF Capacity in Recent 10 Years

Chart 4. China and World AF Capacity in Recent 10 years

0500

100015002000250030003500

2003 2005 2008 2010 2013 2015

kt

WorldChina



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3. Operation Status of AF Plants in ChinaTable 6. Operation Status of AF Plants in China (up to Dec 2013)

Company Capacity (kt/a) status Remark

Shanghai PC 160 Running at normal rates

Anqing PC 70 Running at normal rates

Qilu PC 60 Running at normal rates

Daqing PC 65 Running at normal rates

Jilin Qifeng 140 Running at normal rates

Jilin JiMont 10 Running at normal rates

Hangzhou Bay 70 Running at normal rates

Ningbo Zhongxin 55 Running at normal rates

Fushun PC 55 Closed Closed in June 2012 with restart time impending

Daqing R&C 30 Closed Closed since Jan 2008

Zhejiang Jinyong 60 Closed Closed since Sep 2008

Qinhuangdao Alight 55 Closed Closed since May 2008

Daqing R&C, Qinhuangdao Alight and Zhejiang Jinyongare unlikely to restart, Fushun PC is hard to be back online.


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ⅢⅢⅢⅢ . Factors Influencing AF Industry

1. The Low Self-sufficiency Rate of Feedstock Acrylonitrile

Chart 5. The Market Fundamentals of ACN in China


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Table 7. The Status quo of ACN Producers in China

There are 9 ACN producers in China, with the total capacity at around 1,420kt/a.

Company Capacity (kt/a)

Jilin Chemical 452

Shanghai Petrochemical 130

Shanghai Secco 260

Fushun Petrochemical 92

Anqing Petrochemical 210

Daqing Petrochemical 80

Daqing R&C 80

Lanzhou Petrochemical 35

Qilu Petrochemical 80

Total 1,419


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2. Insufficient Development on AF Products Led to the Declining Proportion of AF in Chemical Fiber Industry

Table 8 the Capacities of Major Chemical Fibers in China (kt/a, %)

2000 2005 2010 2013

Variety Capacity Share Capacity Share Capacity Share Capacity Share

Polyester 5,100 73.91 13,500 80.84 26,800 81.21 35,000 83.33

Acrylic 475 6.88 820 4.91 920 2.79 780 1.86

Nylon 390 5.65 720 4.31 1,620 4.91 2,110 5.02

Viscose 600 8.70 1,220 7.31 2,200 6.67 3,700 8.81

All CFs 6,900 16,700 33,000 42,000



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3. Low Differentiation Rate of AF Products

� China has been the world largest ACN producer for many years and AF production in China accounts for around 40% of world production, but generally speaking, homemade AF products are lack of high-tech content citing limited value added and differentiated products, resulting in less competitiveness on the market. Though there is a gap in demand from downstream consumers, run rates of Chinese AF producers have been hovering at 90%.


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4. Unreasonable Product Structure

The Consumption of AF Products in China in 2010

Textiles &Garment

70%

Decoration27%

Industry &others3%

Textiles & Garment

Decoration

Industry & others


11th China International Acrylonitrile & Acrylic Fiber Forum

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IV . The Way out for China AF Industry

1. To Control Total Capacity and Improve Product Quality

AF capacity is nearly 800kt/a in China; annual import volume is about 200kt, and export volume is less than 10kt. However, annual apparent demand in China is only 900kt.

Run rates of Chinese AF plants have hovered at 90% in recent years as competitiveness of homemade products are not strong enough. The AF capacity in China is basically saturated, so there is a need to properly control total capacity until new application fields are developed. And meanwhile, it’s quite necessary to improve the quality of existing AF products so as to ease the impact from imports.

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2. To Speed up the Transformation and Upgrade

To focus more on soft power such as resources, information, technology, brand,

service and market influence instead of traditional hard power like equipment and

capacity.

Hard Power Soft Power



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3. To Strengthen Product Differentiation and R&D on Value-added Products

Among more than 200kt AF imports every year, at least half of them are differentiated products, most unable to be produced in China or with higher quality than homemade ones.

AF, like wool, is featured with light weight, warmth retention, easily dyeable, anti-moth and resistant to sunlight, and these features are beyond any other chemical fibers. With the improvement in life standard, the demand for textile products apart from garment expands further.

Since 2010, many Chinese AF producers have enhanced R&D on new products and developed new application fields in order to strengthen the competitiveness of AF and get out of the plight. For instance, Jilin Chemical Fiber developed flame-retardant AF, anti-pilling AF and high tenacity AF; Shanghai PC developed far IR AF, anti-bacterial and odor-resistant AF and dope-dyed AF; and Daqing PC developed anti-static AF. And these new products have realized commercial production and brought profit for the companies. In addition, some companies can also conduct R&D on high-performance and value added products like carbon fiber and heat-resistant AF.


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4. To Accelerate the Product Restructuring

� In 2010, the proportions of China’s AF consumption in textiles & garment, decoration and industry & others were 70%, 27% and 3%. The ideal proportions were 50%, 35% and 15% respectively.

Ideal AF Consumption Proportions in China

Textiles &Garment

50%Decoration

35%

Industry &others15%

Textiles & GarmentDecorationIndustry & others



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5. To Hold Promotions to Guide Costumers

� Hold more exhibitions to strengthen the popularity and influence of AF by making more customers understand characteristics of AF and to find more potential downstream clients and partners. Subsequently, develop more new products in cooperation with clients to realize mutual benefit.


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6. To Enhance Self-discipline within the Industry

� Led by the Acrylic Fiber Committee, producers should strengthen self-discipline in production and pricing, develop industrial alliance, and enhance the global cooperation. Meanwhile, the producers should act against unfair international trade according to laws and regulate the market order.



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In general, against the backdrop of slowing global economic growth, Chinese AF industry should:

Keep high quality

Improve standard

Reduce cost

Strengthen R&D

Develop new fields


where is the way out for af amid the slow economic growth?€¦ · world economy is struggling...

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