Overcapacity drives new approaches to production

Rapid economic development brings China's polyvinyl alcohol producers opportunities as well as new challenges that push the industry to innovate and change development strategies.

In 1963, a Beijing-based state-owned chemical company brought in an entire manufacturing facility from Japan to produce PVA with acetylene made from calcium carbide. The capacity was merely 10,000 metric tons a year.

In the following years, China established eight standard vinylon plants using a single blueprint in the provinces of Anhui, Hunan, Shanxi, Fujian, Yunnan, Jiangxi and Hebei as well as Guangxi Zhuang autonomous region.

With a series of favorable policies released by the Chinese authorities to support the development of western areas, several new PVA plants have been established in Inner Mongolia and Ningxia Hui autonomous regions, which have abundant coal and calcium carbide .

The past decades witnessed rapid development of the chemical material industry, with capital flooding in from both state-owned and private companies.

From scratch, China became the world's largest producer, making about half of the world's PVA.

The domestic market demand for PVA remained relatively stable at around 500,000 metric tons for several years before the global financial crisis in 2008, when it fell to less than 460,000 metric tons as many companies including textile and real estate firms struggled and even went bankrupt.

In 2009, the global PVA market recovered, with the gross demand rising back to the level before the financial crisis.

With the rapid development of various sectors including manufacturing and construction, China's demand for PVA is expected to maintain an annual growth rate of around 9 percent for the next few years.

Internationally, most of the world's PVA producers are located in about 20 countries and regions including China, Japan and the United States. By the end of 2013, the world's annual PVA production reached 1.2 million metric tons, with the total capacity hitting about 2 million metric tons, half of which is in China.

The world consumed 1.1 million metric tons of PVA in 2013, 70 percent of it in the Asia-Pacific region.

North America used 13 percent of the world's total PVA output in 2013, while Western Europe also consumed 13 percent of global PVA.

The world's PVA consumption is expected to further climb to 1.2 million metric tons in 2014 and even more in the following years.

Despite overcapacity, China's PVA production capacity will further climb in the short run and is expected to hit 1.3 million metric tons in 2015 due to the rapid development of the Chinese economy.

After decades of development, Chinese PVA makers are now producing products with ethylene or acetylene made from calcium carbide, petroleum, natural gas and biomass resources.

Seventy percent of China's PVA products are still made using calcium carbide, followed by petroleum at 16 percent and natural gas, which is used in 11 of production.

The fourth approach is the most advanced and will likely lead the future development of the industry.

"To deal with overcapacity and to upgrade the industry, diversifying the business operation and product catalog is a must in the future," says Wu Fusheng, chairman of the Anhui Wanwei Group Co Ltd, the country's largest PVA producer.

Contact the writer through zhulixin@chinadaily.com.cn

(China Daily European Weekly 09/26/2014 page23)