SINGAPORE (ICIS)--China plans to complete a massive relocation of chemical plants away from cities by 2025, but financial constraints may hamper the project, which is estimated to cost Chinese yuan (CNY) 800bn ($121bn), industry sources said.
The country intends to speed up the site transfer of plants manufacturing dangerous chemicals out of densely-populated city areas to industrial parks, based on a document released early this month by China’s State Council.
For small- to middle-sized plants, the relocation must start in 2018 and be completed by the end of 2020, while bigger plants are ordered to begin the process in 2020 and finish by end-2025.
China classification of plants | |||
| Small | Medium | Large |
Staff headcount | 20-300 | 300-1,000 | >1,000 |
Annual sales | CNY3m-20m | CNY20m-400m | >CNY400m |
These plants can also be re-engineered to produce non-toxic products, or permanently close if relocation is not possible.
Local governments in China are being required to submit detailed work plans, including company lists and timeline for relocation before the end of this year.
Given the huge investment the project entails, the relocation of the plants has the ability to boost China’s economic growth in the coming years, according to government officials.
The project is expected to translate to CNY400bn worth of demand for mechanical equipment, as well as generate about CNY60-80bn in information technology-related demand, based on estimates from China’s Ministry of Industry and Information and Technology.
Lack of funding has been the primary problem that has been preventing the project from taking off in a significant way. Industry players are of the opinion that the Chinese government must foot the total bill, citing that in most cases, the plants listed for relocation have been operating at their sites for years before the cities expanded.
But China has a huge fiscal deficit, which stood at CNY2.83trn ($427bn) in 2016, according to data from the country’s Ministry of Finance. The preliminary budget deficit was about 3.8% of China's GDP, according to estimates by newswire agency Reuters.
Since 2014, provincial governments have been submitting to the central government a list of toxic chemical plants up for relocation and/or re-engineering, in line with China’s embrace of more environmental-friendly policies.
China has stopped approving of construction or expansions of chemical plants in cities, requiring that all new projects have to be located in industrial parks.
However, the average implementation rate for relocations has been less than 20%, primarily due to lack of funds, industry sources said.
In the case of Shanghai Gaoqiao Petrochemical, which is a subsidiary of Chinese petrochemical giant Sinopec, initial discussions were held for its relocation in 2011, with completion originally expected by 2014-2015. But the negotiation process for the CNY60bn relocation took much longer than expected.
In mid-2016, the Shanghai government finally agreed to cover 90% of the cost by paying Sinopec CNY50bn for the relocation of Shanghai Gaoqiao Petrochemical but no further development was heard since, according to market sources.
Sinopec’s other subsidiaries, namely, Yanshan Petrochemical and Guangzhou Petrochemical, had also previously received request to transfer their production sites, which are located near cities.
Based on the new schedule drafted by the State Council, these super big plants will have to complete their relocation by 2020.
Industry sources said that actual financial support from the government was usually less than 10% of the total capital required, and comes in the form of land, low interest rates on loans and tax breaks. These were deemed not enough to speed up the project rollout.
“It’s too difficult for companies and governments to agree on terms of relocating. Who should pay for the bill? There’s no such a law that defines … responsibilities. No one would compromise,” said a source from the economic and information commission of Sichuan province in southwestern China.
Plants up for relocation with an original investment or current value of less than CNY100m receive no cash subsidies from the government.
Some 51 chemical plants in Sichuan need to be relocated, requiring a total capital outlay of CNY23.8bn, according to media reports. Only two of the total have completed the move, with two others underway, while the rest have no definite timelines.
In Shandong province, the biggest chemical production base in China, some 185 plants have been identified for relocation, 70 of which have started the process, according to a local government official.
The eastern province houses 9,505 chemicals producers, of which 2,485 are categorized as producing dangerous chemicals, the official said.
“The central government has agreed to provide financial support valuing CNY57.6bn for 42 of the relocations, but only 11 have materialized and the rest still pending. In one word, money decides the pace,” he said.
In Hubei province in central China, relocation projects are being stumped by lack of actual access to bank loans following assessment of risks, a local government official said.
“It’s a systematic task - very complicated. We all know what’s the problem, but, just no[t the] way to fix it,” the official said.
In the northern province of Hebei, which is adjacent to Beijing and where pollution is very severe, has moved quicker to implement the central government’s plan by providing both a list and timeline in August for plants that need to be relocated.
Based on its plan, a total of 35 plants will move out of cities before 2020. For 15 of them, the deadline was before December 2018, with three expected to complete the process as soon as March 2018.
But most of the companies in the list have yet to start the process, sources from the companies admitted.
In the case of Hebei Xinhua Holdings, it will have to spend nearly CNY1.5bn to relocate its production and it simply does not have the needed capital, a company source said.
It operates a 200,000 tonne/year methanol plant; a 50,000 tonne/year formaldehyde plant; and a 150,000 tonne/year of hydrogen peroxide plant at the Hebei capital city of Shijiazhuang and is being required to complete relocation by October 2019.
“We’re actually not in the very central area but in a county town. The industry park we’re moving to is just 4-5km away. I’m bewildered of the necessity to move,” the company source said.
Focus article by Fanny Zhang
Source: Icis News
26 September 2017 08:12
DATE : 2016-09-22
UK-based methyl methacrylate (MMA) producer Lucite International has declared force majeure (FM) on methacrylate monomers at its Cassel facility in the north of England, market sources said on Friday.
In a letter to customers seen by ICIS, Lucite said it regretted to inform customers that as a result of an unforeseen technical issue at the Cassel site it had no option but to temporarily shut down operations for an as yet unspecified period of time in order to resolve the situation.
The dispatch of MMA, methacrylic acid (MAA), and n-butyl methacrylate (nBMA) will be suspended with immediate effect until production at the Cassel site has been restored to a stable position.
Upon resumption of dispatches, available volumes of MMA, MAA and nBMA will be allocated to customers on a fair and reasonable basis, and in accordance with contract agreements.
The company tried to assure its customers that it is working to mitigate the impact on business and will continue to update its customers as the situation develops.
Lucite was unavailable for comment at the time of writing.
Lucite International has the capacity to produce 200,000 tonnes/year of MMA from its Cassel facility in Billingham, northern England.
Global MMA supply remains short, on the back of a series of planned and unplanned outages.
MMA is used in the manufacture of acrylic sheet, surface coatings, emulsion polymers and adhesives.
Source Icis News
DATE : 2017-09-08
NEOS Oxide is planning to build a vinyl acetate monomer (VAM) plant with annual production capacity of 300,000 tonnes in Europe with capital expenditure (capex) between €100m and €500m, a spokesperson for the Switzerland-headquartered petrochemicals major said on 5 September.
“Our VAM project represents a further major investment for INEOS”, Graham Beesley, INEOS Oxide’s CEO
The spokesperson added the engineering studies being carried out at the moment would be finalised “during the course” of 2018, when the company would announce the final location for the plant. It expects to start up the plant in 2020 or 2021 at the latest, it added.
The company is considering to locate the new VAM plant at one of its three petrochemical sites – Saltend in the UK’s northern city of Hull, Koln in Germany or Antwerp in Belgium.
“As mentioned, the amount of the investment depends on the outcome of the work we are carrying out now but this will range from €100 plus million upwards.” INEOS had said earlier on 5 September the rationale behind the new VAM plant was the fact that Europe is short of that product, with imports “from remote locations” helping to ease the shortage.
Chemical trade figures from the European statistical agency Eurostat consistently show VAM’s demand in the region is mostly covered by imports, which largely outnumber exports.
VAM is a key building block for a wide range of industrial applications like paints, windscreens, films, adhesives as well as for production of polyvinyl chloride (PVC).
INEOS said the three locations considered for the project had access to feedstock ethylene through pipeline or terminal supply, as well as low costs to bring VAM’s other key raw material, acetic acid.
“Our VAM project represents a further major investment for INEOS and will commit the business to a spend in the hundreds of millions of euros, whether it is a new build, or a revamp of the former VAM production facility in Saltend, Hull,” said Graham Beesley, INEOS Oxide’s CEO.
“The market is at present heavily reliant on imports from deep sea locations, and our new capacity is designed to plug the gap and improve supply dependability to our customer base.”
VAM MARKET CALM AFTER HARVEY; POTENTIAL FOR HIGHER FUTURE PRICING
European vinyl acetate monomer (VAM) market reaction to potential fall-out from hurricane Harvey in Texas has continued to be fairly muted for prices in the near term, sources said on 1 September.
Expected increases in September are comparatively modest, and reflecting how suppliers read the changing dynamics of the market before the hurricane struck. However, while sellers generally appear to be targeting fairly small increments this month, the prospect for values further ahead is more pronounced.
Suppliers, along with other players, still see the situation in Texas as very unclear. For that reason, they seem to be adjusting their current price ideas mainly in line with those factors that were already apparent a week before. One said it was going out with a proposed increase on the back of changes in supply-demand fundamentals for September and costs increases before the damage to petrochemicals complexes around Houston.
While one large supplier believed it was “stupid” not to take into account the evident disruption caused by Harvey in setting price targets, while others maintained that there is a general lack of visibility at present.
One cited damage to pipelines, sufficient power supply and quality of stocks in storage tanks among a number of specific issues that needed to be appraised before it would be possible to assess the market impact of the current outages. However, all players acknowledged that there will likely be profound and widespread repercussions from the disaster.
LyondellBasell has declared force majeure on acetic acid and VAM in the US but has not yet done so for European customers, as stocks are currently available in the European market. A company executive acknowledged however that all theatres were likely to be affected as a result of the present crisis, which was not likely to go away any time soon.
The executive stated that the company is refraining from spot sales for the time being, emphasising that stability was the most important objective, with meeting obligations to loyal, regular customers therefore being a priority. Almost all other sellers are also abstaining from spot offers, although other motives, chiefly caution, are also playing a part.
A trader said, “Everyone is unwilling to offer. Everyone is sitting on their stocks and trying to consider the consequences [of Harvey] and for VAM it looks worse than on other products.”
Anticipated shortage of material will make stocks already in Europe very valuable, one supplier asserted. Another commented that he had hoped to retrieve the value of the re-imposed 5.5% EU import duty. “Now you can be…. sure we’ll try to get it back.”
Source Icis News
DATE : 2017-09-06
Supply concerns in the US acrylic acid and acrylates esters markets have eclipsed September price discussions for now, sources said, as buyers sought to ensure continued supply from producers affected by Hurricane Harvey.
While supply was foremost on the minds of buyers questioned after Harvey, a couple of customers said their suppliers have not cancelled orders confirmed before the storm, though there have been and will likely continue to be delays.
On Wednesday, Dow Chemical issued a letter to customers, increasing lead times by 10 days for all of its US monomer orders, including transit time, citing logistics constraints stemming from Harvey.
In the meantime, producers maintained volume-control measures this week:
* BASF continued force majeure on its acrylates and oxo-alcohols
* Arkema continued force majeure on its acrylates
* Dow Chemical continued 100% order control on its acrylates and other products
One producer said its operations were “limping back to normal,” with some truck and rail shipments resuming, production still at minimal levels and Houston-area ports having re-opened.
A second producer confirmed that its production rates were reduced to avoid exceeding containment capacity until shipping resumed.
Additionally, Arkema confirmed that the American Acryl plant in Bayport, Texas – its joint venture with Nippon Shokubai subsidiary NA Industries – was restarting following its closure ahead of Harvey’s landfall.
Tightened supply is expected to exert upward pressure on September free-market acrylates pricing. A seller said propylene increases in July and August would add to that pressure.
The seller also suggested October acrylates would move up on September propylene, which is being pressured higher.
But the US propylene contract price increased by a total of 1 cent/lb ($22/tonne) during July and August, which buyers have described as inconsequential.
No changes in US Gulf acrylates export spot ranges were heard this week, partly on a lack of material available for export during current domestic supply strictures, two producers said.
August rollovers held the ethyl acrylate (ethyl-A) range at 88-94 cents/lb FD (free delivered), as assessed by ICIS.
Acrylates are commonly used to make products including paint and coatings, plastics and construction and pressure-sensitive adhesives.
US acrylates suppliers include Arkema, BASF, Dow and Sasol.
Source Icis News
DATE : 2017-09-05
Acrylonitrile (ACN) producer INEOS declared force majeure at its Green Lake plant in Texas, a source said on Tuesday, as a result of problems associated with Hurricane Harvey.
The plant was shut on 25 August ahead of the hurricane's landfall near Corpus Christi, Texas.
The source did not provide an expected date for the plant to resume production. It remains unclear to what extent the storm affected the plant.
Separately, Ascend Performance Materials, another major producer of US ACN, declared force majeure on 27 August.
The force majeure declarations are expected to cause major supply issues in the US ACN market.
Major ACN producers in the US include Ascend Performance Materials, Cornerstone Chemical and INEOS Nitriles.
Source Icis News
DATE : 2017-09-01
Lucite is experiencing a supply interruption of US methyl methacrylate (MMA) and methacrylic acid (MAA) from its facility in Beaumont, Texas, according to a customer letter obtained on Thursday.
Production at the facility has been seriously affected by catastrophic and unprecedented flooding from Hurricane Harvey, the letter said. The movement of raw materials, finished product, equipment and personnel have also been affected by the storm.
The company is projecting the restart of methacrylate production at Beaumont to be mid-to-late September. Also, Beaumont-produced MMA and MAA shipments will not be made until two days after production flows into inventory.
In the letter, Lucite added that every effort is being made to mitigate the loss of production with support from other assets within the Mitsubishi Chemical Corporation Group.
As a result, the company remains under force majeure for MMA and MAA.
Source Icis News
DATE : 2017-09-01
Rainwater from Hurricane Harvey surrounds Marathon Petroleum Corp oil refinery storage tanks in this aerial photograph taken above Texas City, Texas, US on Wednesday. Photo: VCG
US orders for China's acrylic acid products increased in the past several days, as major chemical plants in Texas had to close facilities that were affected by Hurricane Harvey, companies told the Global Times on Thursday.
These companies as well as industry experts predicted the price of acrylic acid products will likely rise as a result of the combined effect of the influx of overseas orders and domestic plants' low operation rate.
Acrylic acid is traditionally used as the raw material for acylic esters. Applications for water-based acrylicsinclude adhesives, paper, leather coatings and tablet coatings.
As Harvey, which became a tropical storm, continues to hammer Texas, the US' center for petrochemical plants and refineries, several major US acrylic acid plants are suspending operations.
BASF, American Acryl and Arkema Inc said they had shut their facilities as a precautionary measure. As of Wednesday, the shutdowns involved production capacity of 710,000 tons a year, which represents 59 percent of the country's whole production capacity of acrylic acid, a report on industry website chem99.com said on Wednesday.
Dow Chemical Co reduced its operation rate to 60 percent to 70 percent, and its logistics operations have also been affected, chem99.com noted.
Since the output of acrylic acid in the US may be seriously affected for some time by the storm, China's exports of the product to the US are expected to increase, according to a report released by BOC International on Thursday.
A staff member surnamed Li at a leading acrylic acid company in East China told the Global Times on condition of anonymity that his company began to receive more orders from the US clients two days ago and the same happened with other companies in the industry.
"Not only many US clients are placing orders from our company, clients from other countries, who usually purchase acrylic acid from the US, began to make inquiries to us," he said, noting the company's exports to the US market had been flat this year before the hurricane.
However, an employee of Formosa Acrylic Esters (Ningbo) Co, who declined to be identified, said that the impact of the storm in Texas will not likely influence Chinese acrylic acid too much, as the natural disaster will end in a few days.
"No doubt, China's exports of acrylic acid to the US will increase in the short term, but we have to be aware that some producers will ramp up prices to take advantage of the situation," he warned.
At present, China accounts for 38 percent of global acrylic acid production capacity and North America 18 percent. Domestic leading acrylic acid plants include Zhejiang Satellite Petrochemical Co, Shanghai Huayi Company and Wanhua Chemical in East China's Shandong Province.
Wanhua Chemical declined to comment when reached by the Global Times on Thursday.
The price of acrylic acid products is likely to rise in the near future, mainly due to short supplies caused by a combination of the shutdown of some US plants and domestic environmental protection checks, Wu Chenhui, a Beijing-based independent industry analyst, told the Global Times on Thursday.
Li said that the acrylic acid industry has been operating at a low rate in recent months, as the plants' production equipment must be overhauled and inspected on a regular basis.
Chem99.com estimated the output of butyl acrylate, a kind of acrylic acid compound, may have declined 10 percent in August to 99,000 tons in the domestic market, which, together with increasing overseas orders, will boost prices.
In August, the price of butyl acrylate increased 14.6 percent to about 11,000 yuan ($1,667) per ton in China, data from Beijing-based bulk commodity information supplier JLC showed on Thursday.
Source Global Time