China’s fluorochemical business was marked by four major, game-changing policies in the year 2016. Market intelligence firm CCM has analysed these policies and their effect on the fluoride industry in China.
The four most influencing policies for the fluorochemical industry in China 2016 are the fluorite tax reform, the substitution of fluorine-enriched refrigerants, anti-dumping, and the industry development plan. Some of them have a positive and supporting effect, while others are slowing down growth and development.
Fluorite tax reform
The fluorite tax reform of China’s government was implemented on 1 July of 2016. This reform is part of China’s plan to move away from the charging system, that they used in most of the industries, to a tax orientated system. In this system, companies pay 1-6% taxes, based on the value of their fluorite. The idea behind this new system is to reduce the pressure of the domestic manufacturers and enable a better price stabilisation. Furthermore, the new policy is supposed to support a faster industry recover in China.
Substitution of fluorine-enriched refrigerants
China is going to eliminate the use of HCFC in the long term. To be more detailed, the government has stated earlier to reduce the effective use of HCFC in China by 35% of the use in 2009-2010 until the period of 2016-2020. The chemical, used as a refrigerant, will be substituted continuously with natural refrigerants. This goal has without any doubt a long-lasting effect on the fluorochemical business in China.
According to CCM, even the absence of another production/consumption quota reduction for HCFC in 2016, is not a sign of a changing trend. This fluorochemical, which experienced a quota reduction by 10% in 2015, will be withdrawn from the market in the long run. This analysis is backed up by the fact, that the consumption quotas for refrigeration and air-conditioning, including HCFC-22, was decreased effectively by 8.83% in 2016.
In addition, the Foreign Economic Cooperation Office, Ministry of Environmental Protection revealed their draft about the First Catalogue of Recommended Substitutes for HCFC. The main mentioned substitutes, which CCM concede to play a big role in future substitutions, are propane, isobutene, carbon dioxide, ammonia, and cyclopentane.
The overall situation of HCF producers in China is stated by CCM’s fluoride analyst as: “It is necessary for domestic HFCs manufacturers to accelerate production optimization (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).”
According to CCM, the USA will very likely implement some anti-dumping duties on Chinese HFC blends, since material injuries and threats have been found in Chinese HFC blends.
The dumping margin of 137.23-188.94% at HFC-134a was raised in December 2016 to 232.30%. However, the final ruling of this measurement has not been announced yet, which is expected to occur in February 2017. CCM analysts believe, that China’s manufacturers can win this dumping case if they unite together and actively respond to the suit as one unity.
Industry development plan
China’s overall plan for its fluorochemical industry contains improving innovation and production technology, developing premium marketed products, and extend the industry chain. The plan is written down in the 13th five-year plan.
The future trends of fluorochemicals look very promising, due to the increasing demand from key industries in China, namely automobile, electronics, alternative energy, environmental protection, as well as the aviation industries. All of these industries show an increasing trend, which will surely lift the demand for premium fluoropolymers and HFOs in China.
A good indicator to have a look at the development of fluorochemicals in China is the Petrochemical and Chemical Industry Development Plan (2016-2020). CCM has filtered the most important points regarding the development of fluorochemicals.
Fluorine and silicone materials are going to experience an advancement in the development of enriched resin, rubber, functional membrane materials, and fine chemicals. For functional membrane materials, the focus lays on Li-ion battery separators, as well as flexible package membrane materials. The membranes, that are mentioned, are PVF, PVDF, and TFT-LCD. In the case of electronic chemicals, China wants to focus on liquid crystal materials and innovative lithium salts.
As a result, CCM predicts, that the fluorochemical industry in China will witness a moderate growth in 2017, as they have to meet the growing demand of chemicals in the surging automotive, and alternative energy industry.
CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets.
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