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CCM Data & Primary Intelligence

The Future of Yellow Phosphorus in China Oct. 2010

Researched & Prepared by:

Guangzhou CCM Information Science and Technology Co., Ltd . Guangzhou, P. R. China

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CCM Data & Primary Intelligence Description: Yellow phosphorus, the second largest consumer of phosphorus ore, an irreplaceable and non-renewable resource and closely related to people’s life, constitutes about 15% of phosphorus ore consumption in China. China owns the largest capacity and output of yellow phosphorus in the world. However, Overcapacity has emerged as an eminent problem in Chinese yellow phosphorus industry in recent years. For example China’s capacity in 2008 is about double the size of the global demand, which is only about 800,000-900,000 tonnes every year. That suggests a very low operating rate of China’s yellow phosphorus industry about one third of its capacity during 2003-2008. What are reasons for the low operating rate, or why Chinese yellow phosphorus producers expand their capacity to such a large scale? In China, like several years ago, most yellow phosphorus was consumed by thermal phosphoric acid and phosphorus trichloride in 2008. However, the consumption structure of yellow phosphorus is changing every year. The yellow phosphorus consumption by thermal Yellow phosphorus, the second largest consumption area of phosphorus ore, constitutes about 15% of phosphorus ore consumption in China. And phosphorus ore is an irreplaceable and non-renewable resource and closely related to people’s life, China owns the largest capacity and output of yellow phosphorus in the world. However, overcapacity has emerged as an obvious problem in Chinese yellow phosphorus industry in recent years. For example China’s capacity in 2009 is about double the size of the domestic demand. What’s more, China has begun to restrict export of yellow phosphorus, which aggravates the overcapacity situation. That suggests a very low operating rate of China’s yellow phosphorus industry of about 40%~ 50% in recent years. What are reasons for the low operating rate, or why Chinese yellow phosphorus producers expand their capacity to such a large scale? After few years’ structural readjustment and elimination in yellow phosphorus industry, China’s yellow phosphorus production and phosphorous chemical industry chain is much more reasonable now. How did Chinese make these achievements? What are the details of China’s yellow phosphorus industry development? What are the situation of energy consumption, waste emission and utilization situations in Chinese yellow phosphorus production? Chinese government had implemented policies to restrict export and exploitation of phosphorus ore, export and production of yellow phosphorus since 2005. Currently in 2010, the last year for China’s 11th National Economic and Social Development (2006-2010), the development of phosphorus production has witnessed the major turning point of the industry. What is the trend of electricity price for yellow phosphorus production? What is the current production cost of yellow phosphorus and how is the production cost consisted of? China used to export large volume of yellow phosphorus until 2008, but currently the export is limited since 2008 by increasing the tariff to 120% as highest. Though the tariff has been reduced in 2009, but

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CCM Data & Primary Intelligence the export didn’t recovery, what is the trend of China’s yellow phosphorus export? In the past of China, most yellow phosphorus was consumed by thermal phosphoric acid and phosphorus trichloride. However, the consumption structure of yellow phosphorus is changing every year. The yellow phosphorus consumption by thermal phosphoric acid has been shrinking by consumption share in recent years, while the share of yellow phosphorus in phosphorus trichloride has been increasing. What other changes have taken place to Chinese yellow phosphorus consumption and what have driven such changes to happen? How do the limitation of phosphorus detergent and development of wet-process phosphoric acid impact consumption of yellow phosphorus? The price of Chinese yellow phosphorus, closely related to supply/demand dynamics, changing with global economic environment, seasons, national policy etc., has experienced great fluctuations in 2008, with the highest reaching USD3,504/t and the lowest dropping to USD1,606/t. What are the price changes of yellow phosphorus in 2009 and 2010? It is estimated that it will take 30 years to exploit the remaining yellow phosphorus in China, so China is adjusting industrial structure of yellow phosphorus for saving phosphorus resource. What’s the influence on resource supply, manufacturers, capacity and output of Chinese yellow phosphorus caused by adjusting industrial structure? What is the trend of resource tax levied on phosphorus ore? In this report, you can find the answers to all the above questions. Besides, this report also tries to find answers to the following questions: Ø What is the resource supply situation in China for yellow phosphorus industry? Ø How is the production situation of Chinese yellow phosphors? The production part covers capacity & output, manufacturers’ situation, price, existing problems, cutting edge technologies, comparison of production cost, competitive strategy, etc. Ø How is yellow phosphorus consumed and what changes have taken place to the consumption in recent years? Ø What are the development trends about capacity, output, manufacturers, resource supply, consumption situation in 2010-2019, based on large number of first-hand information and advanced forecast method? Ø What is IE analysis of Chinese yellow phosphorus in 2009? Ø What is SWOT analysis of top 5 manufacturers of Chinese yellow phosphorus industry in Sep. 2010? With this report, you will gain a complete and in-depth impression of Chinese yellow phosphorus industry in its past, present and future. Main content: No.

Content

Page

Executive summary

1

Introduction and methodology

8

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CCM Data & Primary Intelligence I

Resource supply of yellow phosphorus in China

1

I-1

Electricity

1

I-2

Coke

2

I-3

Phosphorus ore

2

- Distribution & reserves

9

- Exploitation & consumption

9

- Policy

13

- Import & export

16

II

Production situation of yellow phosphorus in China

16

II-1

Overview of yellow phosphorus industry

16

- Capacity & output of yellow phosphorus in China

16

- Projects of yellow phosphorus production

19

- Improvements in China’s yellow phosphorus production

21

- Geographical distribution of yellow phosphorus in China in 2010

22

Situation of major yellow phosphorus manufacturers in China

28

- Overview of major yellow phosphorus manufacturers in China

28

- Major manufacturers and their source supply

32

Price of yellow phosphorus in China in recent years

37

- Price of yellow phosphorus and its trend in China

37

- Price in the following five years

40

II-4

Cutting edge technologies

41

II-5

Problems existing in yellow phosphorus industry

46

II-6

Competition strategy

47

II-2

II-3

III

Consumption of yellow phosphorus in China

51

III-1

Overview of yellow phosphorus consumption

51

III-1.1

Yellow phosphorus consumption by volume

51

III-1.2

Yellow phosphorus consumption by region

52

III-1.3

Yellow phosphorus consumption by end use

54

III-2

Introduction of end use segments of yellow phosphorus

55

III-2.1

Thermal phosphoric acid

55

III-2.1.1

Application of yellow phosphorus in thermal phosphoric acid

55

III-2.1.2

Overview of thermal phosphoric acid industry

56

III-2.1.3

Major end users

65

III-2.2

Phosphorus trichloride

65

III-2.2.1

Application of yellow phosphorus in phosphorus trichloride industry

65

III-2.2.2

Overview of phosphoric acid & phosphate industry

66

III-2.2.3

Major end users

69

III-2-3

Other industries (phosphorus pentasulfide, phosphorus pentoxide and sodium hypophosphite, etc.)

70

IV

Import and export situation of yellow phosphorus in China

71

V

Forecast on yellow phosphorus development in China, 2010~2014~2019

80

V-1

Key factors influencing yellow phosphorous development

80

- Overview of key factors

80

Forecast on yellow phosphorus industry

82

V-2

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CCM Data & Primary Intelligence V-2.1

Forecast on capacity & output of yellow phosphorus

82

V-2.2

Forecast on producers of yellow phosphorus

86

V-2.3

Forecast on resource supply in China

86

V-2.4

Forecast on consumption of yellow phosphorus

87

VI

Conclusion and recommendation

94

- Conclusion

94

- Recommendation

95

VII

Appendix: profiles of major manufacturers and end users

96

VII-1

Major manufacturers of yellow phosphorus

96

VII-1.1

Jiangsu Jiangyin Chengxing Industrial Group Co., Ltd.

96

VII-1.2

Yunnan Phosphorus Group Co., Ltd.

98

VII-1.3

Yunnan Malong Industry Group Co., Ltd.

100

VII-1.4

Sichuan Province Chuantou Chemical Industry Group Co., Ltd.

102

VII-1.5

Hubei Xingfa Chemicals Group Co., Ltd.

103

VII-1.6

Guizhou Qianneng Tianhe Phosphorus Industry Co., Ltd.

105

VII-1.7

Yunnan Chengjiang Huaye Phosphorus Chemicals Co., Ltd.

106

VII-1.8

Yunnan Chengjiang Dean Phosphorus Chemical Industrial Co., Ltd.

107

VII-1.9

Yunnan Chengjiang Zaifeng Hydroelectric Development Co., Ltd.

108

VII-1.10

Yunnan Jianglin Group Co., Ltd.

109

VII-1.11

Sichuan Mianyang Aostar Phosphorus Chemical Industry Co., Ltd.

110

VII-1.12

Sichuan Leshan Jinguang Chemical Industry Co., Ltd.

112

VII-1.13

Guizhou Province Kaiyang Anda phospho-Chemical Co., Ltd.

113

VII-1.14

Guizhou Wengfu (Group) Co., Ltd.

114

VII-1.15

Yunnan Honghe Phosphor Power & Co. Ltd.

115

VII-1.16

Yunnan Chengjiang Phosphorus Chemical Jinlong Co., Ltd.

116

VII-1.17

Hubei Danjiangkou Shengyi Phosphorus Chemical Co., Ltd.

117

VII-1.18

Guizhou Kailin Group Co., Ltd.

118

VII-1.19

Yunnan Luliang Wuxing Chemical Co., Ltd.

119

VII-1.20

Guizhou Qingli Tianmeng Chemical Co., Ltd.

119

VII-2

Major end users of yellow phosphorus (phosphoric acid)

120

VII-2.1

Wuhan Inorganic Salt Chemical Co., Ltd.

120

... VII-2.10

0 Chongqing Chuandong Chemical (Group) Co., Ltd.

131

VII-3

Major end users of yellow phosphorus (phosphorus trichloride)

132

VII-3.1

Zhejiang Wynca Chemical Group Co., Ltd.

132

...

0

VII-3.10

Jiangsu Binhai Wuzhou Chemical CO., Ltd.

144

VIII

SWOT analysis of top five producers, Sept. 2010

145

Executive summary: Resource supply Electricity and coke The electricity supply still can not satisfy the demand in China. In order to restrict electricity

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CCM Data & Primary Intelligence consumption, Chinese government has abolished the former preferential price policy for the high energy-consuming industries since 2007. Since the electricity cost constitutes over xx% of the manufacturing cost of yellow phosphorus, Chinese government’s electricity price policy greatly affects the industry. As the electricity supply for most yellow phosphorus production depends on hydropower, Chinese government has to restrict the electricity consumption of yellow phosphorus when the weather is dry. Since 2009, Chinese government has raised the electricity price for non-residential use. As for high energy consuming industries, it has further restricted electricity supply by banning preferential electricity prices formulated by local governments and rigidly enforcing the discriminatory electricity prices, and both of these actions greatly impacts the yellow phosphorus production in production cost. Chinese coking industry has developed rapidly in the past few years, especially during 2003~2007. In 2008 the output of coke declined a little, but in 2009 the figure creates a new record reaching xxx million tonnes. As of 2010, the coke industry in China is saturated or even in excess capacity. Yellow phosphorus production consumed only xxxx% of total output of coke in China in 2007, so supply of coke hasn’t significant influence on yellow phosphorus industry. Phosphorus ore Phosphorus is one of the most important chemical materials, and all the phosphate chemicals are originally derived from phosphorus ore. China’s phosphorus resource is the second largest in the world, only next to Morocco. Statistics suggests that the proven reserves of phosphorus resources in China are xx billion tonnes. Though Chinese phosphorus ore is abundant, it is not rich. The grade of phosphorus ore in China is low in general, with the average grade (Content of phosphorus pentoxide) of only about xx%. China’s high-grade phosphorus ores reserves is only 1.108 billion tonnes, accounting for xx% of its total phosphorus reserves. In addition, x% of phosphorus ores in China are high-Mg phosphorite and they need to be grinded into 200mesh/inch for mineral liberation. Chinese phosphorus resources is concentrated in Yunnan, Guizhou, Hubei, Sichuan and Hunan, with their total resource with actual economic value constituting xx% of China’s total resource with actual economic value. Though China’s phosphorus ore output has been increasing, China has been exporting less and less to overseas market in recent years, due to Chinese government’s intention to guarantee domestic supply since phosphorus resource is irreplaceable and nonrenewable. Based on the present exploitation speed, China’s high-grade phosphorus ores will be exhausted in 2013~ 2014, and the remaining ores with actual economic value can only be exploited for another 40 years. Website: http://www.cnchemicals.com Tel: +86-20-3761 6606

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CCM Data & Primary Intelligence In China, there are xxx phosphorus ore manufacturers with total output of xxx tonnes in 2009. Top manufacturers are controlled by government and they are usually involved in various phosphate industries, instead of solely exploiting ores. Phosphate fertilizer is the largest consumption area of phosphorus ore in China with huge demand from agriculture. Production and consumption Capacity and output Overcapacity has emerged as an obvious problem in Chinese yellow phosphorus industry in recent years. Chinese yellow phosphorus capacity is about xxxxt/a in Sep.2010, over double size of the global demand, which is only about xxx-xxx tonnes every year. The global financial crisis broken out late in 2008 had impacted most yellow phosphorus’ downstream industries and brought down the demand for yellow phosphorus. And the operating rate of domestic yellow phosphorus industry declined in late 2008. What’s more, the specific high export duty levied on China’s yellow phosphorus further lowers down the demand for China’s yellow phosphorus in 2008. These two factors led to a large yellow phosphorus inventory of about xxxx tonnes by the end of 2008, which resulted in operating rate decline of China’s yellow phosphorus in the early 2009. The recovery of economy in the world, especially in China stimulates almost all the industries and drives up the operating rate of yellow phosphorus industry in 2009. In 2010, along with the gradually enhancing stimulation efforts and vanishing effects of financial crisis, the demand for yellow phosphorus is further stable, and the average operating rate in active producers is higher than that in 2009. Geographical distribution China’s yellow phosphorous production is highly concentrated in such locations as Yunnan, Guizhou, Sichuan and Hubei, whose total capacity constitutes over xx% of national total in 2010. Reasons for the production concentration in location is that these areas have abundant phosphorus ore reserves and relatively low electricity cost. Character of CCM' Report: The aim of this report is to provide powerful assistance to the strategy group and the management team in making correct decision as how to penetrate the ever-increasing China market and how to catch the maximum commercial opportunities. The report is formulated independently by CCM’s professional market researchers, based on the first-hand and primary data which are analyzed by scientific methodology, confirmed with both manufacturers/end users/traders and legal authorities, and presented in a logic way. Sample pages:

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Yunnan is the largest production base in China, accounting for XXX of China’s total yellow phosphorus capacity in Sept. 2010. Table II-1-2 Output of yellow phosphorus in different provinces in China, 1999-2009, tonne Year

Yunnan

Guizhou

Sichuan

Hubei

1999

XXXXXXX

XXXXXXX

XXXXXX

XXXXXX

2000

XXXXXXX

XXXXXXX

XXXXXX

XXXXXX

2001

XXXXXXX

XXXXXXX

XXXXXX

XXXXXX

2002

XXXXXXX

XXXXXXX

XXXXXX

XXXXXX

2003

XXXXXXX

XXXXXXX

XXXXXXX

XXXXXX

2004

XXXXXXX

XXXXXXX

XXXXXXX

XXXXXX

2005

XXXXXXX

XXXXXXX

XXXXXXX

XXXXXX

2006

XXXXXXX

XXXXXXX

XXXXXXX

XXXXXX

2007①

XXXXXXX

XXXXXXX

XXXXXXX

XXXXXX

2008①

XXXXXXX

XXXXXXX

XXXXXXX

XXXXXX

2009①

XXXXXXX

XXXXXXX

XXXXXXX

XXXXXXX

Source: CCM International

Table IV-3 Yellow phosphorus export situation in different provinces in China in 2009, tonne Province

Export volume volume’’09

Output ’09

Share

Yunnan

XXXXXX

XXXXXXXXXX

XXXXX

Sichuan

XXXXX

XXXXXXXXXX

XXXXX

Guizhou

XX

XXXXXXXXXX

XXXXX

Hubei

XX

XXXXXXXXXX

XXXXX

XXXXXXX

XXXXXXX

XXXXX

Total

Source: CCM International

� Price in the following five years CCM predicts that the price of yellow phosphorus will increase a little in the following two to three years and then will increase to around XXXXXXXXXXXXXXXXXXXXX, with the forecast made based on the following factors. III-2-2-2 Overview of phosphorus trichloride industry The production of PCl3 started during the 1970s, with the development of pesticide and it was produced by pesticide manufacturers themselves. At the beginning, PCl3 was consumed by the manufacturers themselves in the production of pesticide and it was not sold to others. The sales of PCl3 didn’t begin until 1990s. The output of PCl3 in 1990 was XXXXXXX tonnes and it came to XXXXXXX tonnes in 1999, increasing by XXXXX in production volume. In 2000, the output reached XXXXXXX tonnes. The output of PCl3 in 2008 reached XXXXXXX tonnes boosted by glyphosate production. And in 2009 this volume reaches XXXXXXX tonnes, with CAGR of XXXXXX during 2000-2009.


Table III-1-2-1 Yellow phosphorus consumption situation by province in China, 2009, tonne Output of Thermal

Phosphorus

phosphoric acid

trichloride

Province

Others

Total

yellow phosphorus

Yunnan

XXXXXX

X

XXXXXX

XXXXXX

XXXXXXX

Jiangsu

XXXXXXX

XXXXXXX

XXXXXX

XXXXXXX

X

Sichuan

XXXXXX

XXXXX

XXXXX

XXXXXX

XXXXXXX

Guangxi

XXXXXX

X

XXXXX

XXXXXX

XXXXX

Hubei

XXXXXX

XXXXXX

XXXXXX

XXXXXX

XXXXXXX

Shandong

XXXXXX

XXXXXX

XXXXX

XXXXXX

X

Guizhou

XXXXXX

X

XXXXX

XXXXXX

XXXXXXX

Zhejiang

XXXXX

XXXXXX

XXXXX

XXXXXX

X

XXXXXX

XXXXXX

XXXXX

XXXXXX

XXXXX

XXXXXXX

XXXXXXX

XXXXXXX

XXXXXXX

XXXXXXX

Others Total

Source: CCM International

The Future of Yellow Phosphorus in China  

Yellow phosphorus, the second largest consumer of phosphorus ore, an irreplaceable and non-renewable resource and closely related to people’...

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