LONDON, March 6, 2017 /PRNewswire/ -- Editor's Note
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Welcome to the Jan. Issue of China Fluoride Materials Monthly Report.
This newsletter will help you stay ahead of the game in this fast-changing market with real-time reporting on the entire fluoride materials industry chain, from raw materials to end consumption. It includes breaking news from China and abroad, the latest market data (price, import & export, production, consumption, operating rates, etc.), in-depth analysis of market trends, Chinese government policy, performance of Chinese producers, M&A, new technology, and expert commentary from industry insiders.
Here is the Editor's Note for you to know about the Jan. issue specifically:
In Jan. 2017, China's fluorochemical manufacturers maintained low operating rates, causing tight supplies and increasing prices. For instance, the prices of fluorite (CaF2>97%), AHF (99.95%) and PTFE all rose to certain extent.
The environmental protection tax law is to be implemented on 1 Jan., 2018. It will spell increased available funding for environmental protection spending by local government, and meanwhile should lead to better enforcement of the law (enterprises will be forced to manage pollutants and to reduce emissions / discharge). Chemical enterprises, as a key target, are expected to do a good job of environmental protection so as to achieve sustainable development and enhance competitiveness.
The 2017 HCFCs production / use quotas were released. Specifically, the production quotas are equal to that in 2016. The use quotas involve 5 industries in: use quotas for the remaining 3 businesses have been decreased, except PU foaming and room air conditioning industries. This is an indication that the Chinese government is increasing the application limitations, with an intention to force manufacturers to step up the eliminations, develop substitutes and achieve business transformation and upgrade.
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Last year, 2016, a succession of policies relating to the fluorochemical business were released. CCM has specifically selected 4 key policies for analysis, resource tax reform for the fluorite segment, the substitution of fluorine-enriched refrigerants, anti-dumping, and industry development plan.
At the end of 2016, China's HCFC-22 price stopped falling and made a rebound, impacted by the deficient production quota and the active stock-up by downstream enterprises. CCM believes that the price will fall again during Jan.-Feb. 2017.
In Jan. 2017, Suzhou Fluolyte released a proposal for private placement, a move intended to raise funding for its main business development.
In Jan. 2017, Shanghai 3F expected a loss in full-year 2016. This loss continued for 2 consecutive years, indicating that its shares will be highlighted for delisting risk following the official release of its 2016 financial report.
In Jan. 2017, Do-Fluoride announced that one of it's subsidiaries AEVs had been listed in the latest government recommended automobile catalogue. CCM believes that this year, 2017, will be the first year in which Do-Fluoride accelerates AEV business development and turns a profit, given that a proposal to adjust subsidies offered has already been issued.
In Jan. 2017, the MEP unveiled the HCFCs production / use quotas in 2017. Specifically, the production quotas are equal to that in 2016.
In late Dec. 2016, China officially released the environmental protection tax law, which is to be implemented on 1 Jan. 2018. The new law replaces the existing pollutant discharge fee system with an environmental protection tax system, some of the revenue from which will go to local government, and brings with it greater enforcement of the law.
In Jan. 2017, Jiangsu Zhongtian passed the scientific achievement appraisal for its independently developed PVDF membrane for PV back-plate. Thanks to its high quality and low cost, the membrane is expected to be supported by government policies which are now targeted at reducing costs for PV modules, during the promotion of mass application.
In Dec. 2016, impacted by environmental policies and decreased supply, the quoted price of AHF in southern China rose significantly, followed by northern China.
In Dec. 2016, China's PTFE price rose significantly, impacted by the decreased supply and the increased raw material price.
Recommended article for China Fluoride Materials Monthly Report 1701:
Key policies for fluorochemical business in 2016
I Fluorite tax reform
On 1 July, 2016, a resource tax on fluorite, which is levied based on value, was introduced with a tax rate of 1-6% (former: charged based on quantity, at USD3.04/t OR RMB20/t). In the meantime, the basis for taxation was modified, from "sales volume of raw ore" to "sales of raw ore and ore concentrate (OR raw ore based processed products)". Notably, the Chinese government is to completely remove the charging system, and to introduce more preferential tax policies, which is expected to result in an easing of pressure on domestic fluorite enterprises, stabilisation of prices, and gradual industry recovery.
II Substitution of fluorine-enriched refrigerants
In Jan. 2016, production / consumption quotas for hydrochlorofluorocarbons (HCFCs) for that year were released. Unlike in 2015, when a YoY reduction of 10% was witnessed, the HCFC production quota was not decreased, remaining the same as in 2015. Specifically, annual quotas for HCFC-22, HCFC-141b and HCFC-142b were 274,279 tonnes, 66,313 tonnes and 22,845 tonnes respectively.
However, consumption quotas for the refrigeration and air-conditioning and PU foaming segments in particular, were decreased.
Refrigeration and air-conditioning: HCFC-22 quota down by 8.83% YoY to 67,059 tonnes
PU foaming: HCFC-141b quota down by by 27.25% YoY to 2,665 tonnes
The year marked the beginning of the 2nd phase of HCFC elimination in China. The Chinese government is planning to phase out 35% of the average 2009-2010 output between 2016 and 2020. The lack of change in production quotas in 2016 from the previous year was not indicative of a trend, and it is forseeable that they will be reduced in the future.
At the end of Aug., the Foreign Economic Cooperation Office, Ministry of Environmental Protection released an exposure draft about the latest First Catalogue of Recommended Substitutes for HCFCs. The exposure draft included natural refrigerants, which CCM believes will play a dominant role in future substitution, including propane (R290), isobutene (R600a), carbon dioxide (R477), ammonia (R717) and cyclopentane.
On 10 Oct., the 28th conference of the parties of the Montreal Protocol on Substances that Deplete the Ozone Layer was held in Kigali, Ruanda. Nearly 200 countries / regions attended the meeting, during which they passed an amendment to the protocol in a bid to reduce the use of hydrofluorocarbons (HFCs).
This amendment is a warning to China's HFC industry, according to analyst CCM: "It is necessary for domestic HFCs manufacturers to accelerate production optimisation (repurposing facilities for premium marketed products) and phase out obsolete production capacity (so as to achieve cost reductions and increase profit), and to increase investment in the R&D of new substitutes, hydrofluoroolefins (HFOs)." Meanwhile, natural refrigerants are expected to capture some of the market share lost by HFCs in the coming years.
On 27 Nov., the 77th meeting of the Multilateral Fund Executive Committee of the Montreal Protocol on Substances that Deplete the Ozone Layer was held in Montreal, Canada. The plan for China's 2nd phase of HCFC elimination, which is targeted at 4 key industries, commercial refrigeration and air conditioning, room air conditioners, polyurethane foam and extrusion polystyrene foam, was examined and passed.
So far, this 2nd phase plan has obtained funding of over USD500 million, including funding from the refrigeration maintenance industry plan and the cleaning industry plan.
On 5 Aug., 2016, the United States International Trade Commission (USITC) notified the United States Department of Commerce (USDC) of their final ruling in the Chinese HFCs (incl. blends and components) anti-dumping suit.
Specifically, the USITC affirmed that material injuries/threats had been caused to local business by Chinese HFC blends, but found that injuries/threats from corresponding HFC components had not been caused. This signified that the US would levy anti-dumping duties on Chinese HFC blends, but not on individual HFC components.
In late Sept., the USDC announced an affirmative primary ruling in the anti-dumping investigation of 1,1,1,2-tetrafluoroethane (HFC-134a) imported from China, and determined the dumping margin at 137.23–188.94%.
On 1 Dec., the USDC announced a revision to the primary ruling regarding the Chinese-made HFC-134a anti-dumping case: the weighted average dumping margin of all Chinese exporters / manufacturers was increased to 232.30%.
It is expected that the USDC will announce their final ruling in Feb. 2017, after which the USITC will make a final determination regarding injury to industry in March.
In this HFC-134a anti-dumping case there is a large possibility that China will win again, according to analyst CCM. Having gained experience from the former case, domestic HFC-134a companies will be better able to handle this one. Besides, since the domestic HFC-134a market is currently recovering, companies should be more determined to unite as one and actively respond to the suit.
IV Industry development plan
In Aug. 2016, a goal was set for China's fluorochemical business during the 13th five-year period: to build a powerful fluorochemical nation (more rational business structure, greater potential for development and anti-risk capability) by 2020, by improving innovation and production technology, developing premium marketed products and extending the industry chain.
In particular, urgent demand for high added value and high performance fluorochemicals has been shown from light industry as well as the automobile, electronics, alternative energy, environmental protection and aviation industries. This indicates strong development potential for mid-marketed and premium fluoropolymers, new type refrigerants (HFOs), fine fluorochemicals and fluorine-enriched coatings.
On 18 Oct., the Ministry of Industry and Information Technology of the People's Republic of China officially released the Petrochemical and Chemical Industry Development Plan (2016-2020).
CCM specifically paid attention to the innovative development of new chemical materials outlined in the plan. Key content relating to fluorochemicals is as follows:
1. Fluorine and silicone materials: advancement of the industrialisation of phenyl organosilicon monomer; specific development of premium marketed fluorine- and silicone-enriched resin / rubber, fluorine-enriched functional membrane materials, high quality fluorine- and silicone-enriched fine chemicals (such as high purity electronic chemicals, fluorine- and silicone-enriched surface active agents, and fluorine- and silicone-enriched intermediates); hastened development of low GWP ozone depletion substance (ODS) substitutes.
2. Functional membrane materials: development of medium and premium marketed Li-ion battery separators, flexible package membrane materials, polyvinyl fluoride (PVF) and polyvinylidene fluoride (PVDF) backplane membranes, fluorine-enriched proton exchange membranes and polaroids for thin film transistor-liquid crystal displays (TFT-LCD).
3. Electronic chemicals: development of liquid crystal materials (fluorine-enriched liquid crystal intermediate) for panel displays; development of innovative lithium salts such as lithium bis(fluorosulfonyl)imide (LiFSI), and electrolyte solvent such as fluoroethylene carbonate for Li-ion battery.
On 19 Dec., the State Council released the 13th Five-year Plan for the Development of Strategically Emerging Industries, listing goals, key tasks and policies & measures for the industry's development for 2016-2020.
CCM believes that the fluorochemical business, which strongly supports strategically emerging industries, will follow these industries footsteps and grow rapidly. For instance, many fluorochemicals are needed during the manufacturing of a core component of alternative energy vehicles, Li-ion batteries, including PVDF adhesive, PVDF coating, lithium hexafluorophosphate (LiPF6) and lithium bis(trifluoromethanesulphonyl)imide (LiTFSI).
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