The basic situation and development of the nylon industry in our country.

2019-01-17

1. Current supply and demand situation of the nylon industry in China

1. Recent production capacity of nylon fibers

After rapid development in recent years, the production capacity of nylon fibers reached 448,000 tons by the end of 1998, including: 224,500 tons of civil filament, 32,000 tons of short fibers, and 191,500 tons of industrial yarn. The production capacity of nylon fibers by variety is as follows: the production capacity of nylon 6 fibers is 376,000 tons, and the production capacity of nylon 66 fibers is 72,000 tons.

2. Recent production volume of nylon fibers

Due to the impact of the Southeast Asian financial crisis, the production volume of nylon fibers in 1998 was slightly lower than in 1997 at 294,700 tons, including 132,400 tons of civil yarn, 27,000 tons of short fibers, and 135,300 tons of industrial yarn. According to statistics from the National Bureau of Statistics, the total production volume of nylon fibers in 1999 was 319,200 tons.

3. Recent import and export situation of nylon fibers

According to the latest customs statistics, in 1999, a total of 104,700 tons of imported nylon filament and 6,500 tons of nylon short fibers were recorded, totaling an import volume of 111,200 tons of nylon fibers, setting a historical record.

4. Current production status of nylon raw materials

Caprolactam: The original production facility for caprolactam at Eagle Mountain Petrochemical has been expanded from an annual output of 50,000 tons to 70,000 tons. The Nanjing Oriental facility has a production capacity of 50,000 tons; both facilities are operating at full capacity. The caprolactam production line in Shijiazhuang is about to start mass production. The domestic annual production capacity for caprolactam will be 174,500 tons.

Nylon 66 salt: With the commissioning of Shenyang Chemical Group's nylon 66 salt production line with a capacity of 65,000 tons and Liaohe Chemical's capacity of 45,000 tons, the total domestic production capacity for nylon 66 salt is currently at 110,000 tons. This slightly exceeds domestic user needs and creates conditions for downstream enterprises to expand or upgrade.

5. Supply and demand forecast for nylon raw materials in the year 2000

According to normal demand growth rates, domestic demand for caprolactam will reach 350,000 tons in the year 2000. The maximum domestic supply can reach up to 190,000 tons, resulting in a shortfall of at least 160,000 tons. The supply for nylon salt can basically meet domestic demand.

II. Analysis of the current production status of China's nylon industry

Since 1995, China has maintained a high growth rate. In 1998, the total production volume of nylon fibers was 294,700 tons. This represents an increase of 44,700 tons compared to 1995, with a growth rate of 17.88% and an average annual growth rate of 5.6%, far exceeding the global average growth rate for nylon fiber production. However, due to China's large population, per capita ownership of nylon fibers remains very low; by the end of '99', annual imports had already surpassed 110,000 tons.

Domestic nylon enterprises lack competitiveness in terms of production scale, product quality, and new product development. Although there are many enterprises in the nylon industry developed under planned economic conditions, they tend to be small-scale with dispersed factory locations. Issues such as blind construction and repeated construction are serious problems that lead to low-level competition and a limited variety of products—most being low-end products like socks and civilian silk products. Despite this situation, the application fields for nylon continue to be impacted by other fibers such as polyester and polypropylene; due to price factors among others, it has gradually lost its original market share. Therefore, developing new products in the nylon sector has become imperative. Currently industrially produced products abroad such as BCF nylon and luggage fabric are still in development or trial production stages domestically.

The backwardness of China's nylon products is directly related to the shortage of raw materials. The construction in the raw material sector has severely lagged behind the development of the nylon industry; moreover, raw material plants built under planned economic conditions have high production costs which compel nylon producers to focus more on imports and smuggled goods. This has led to rampant smuggling in raw materials which severely affects the healthy development of the nylon industry and exacerbates disordered competition within it.

III. Caprolactam as a raw material for nylon has become a major bottleneck restricting healthy development in the nylon-6 industry.

In '98', domestic caprolactam output was recorded at '1204' thousand tons with imports reaching '1759' thousand tons and exports at '243' thousand tons; thus apparent consumption was '2720' thousand tons with a shortfall amounting to '1516' thousand tons and an import dependency ratio at '55.74%'. In '99', with Shijiazhuang Chemical Fiber Co., Ltd.'s trial operation for its annual output project reaching '50' thousand tons for caprolactam alleviating some supply-demand tensions; however with economic recovery leading to increased domestic output for '99', this offset each other resulting in no improvement regarding caprolactam shortages as customs statistics show that imports reached '2208' thousand tons by year-end '99'.

IV. Recommendations

1. There is still significant room for growth in China's nylon fiber production capacity; however it should pursue an intensive path to form economies of scale.

In recent years China’s nylon industry has seen considerable development but remains small-scale; statistics show that small enterprises dominate this sector (see table). There are over '100' companies producing nylon in China with an average production capacity below '0.4' thousand tons while Japan's South Korea's and Taiwan's average capacities exceed '30' thousand tons each—with South Korean companies averaging '60' thousand tons per enterprise. In recent years state-owned enterprises’ share within this sector has gradually decreased while joint ventures have increased leading to a tripartite structure among state-owned enterprises joint ventures and private firms; following principles that support strong firms while allowing weaker ones to exit history will help create our own giant enterprises capable of competing internationally. With China’s imminent accession into WTO it is essential to pursue an intensive path expand economic scale and eliminate some technologically backward small-scale low-efficiency enterprises.

2. Increase efforts to develop new varieties of nylon fibers to enhance market competitiveness.

In recent years, China's nylon industry has been sluggish, and the nylon market is weak. This is not due to an oversupply of domestic nylon production capacity; on the contrary, a large amount of nylon fibers and fabrics still need to be imported from abroad each year. One reason for this is that the varieties of domestic nylon fibers cannot meet market needs. In the field of fiber usage, increasing the differentiation rate of fibers and developing functional products such as anti-static, flame-retardant, and antibacterial products are effective ways to enhance the market competitiveness of the nylon industry. In terms of industrial nylon fibers, the domestic proportion is still very small. It is expected that by the end of this century, there will be significant demand for nylon short fibers used in paper-making blankets and felt. Nylon BCF is still in the trial production stage domestically, and most carpets used in high-end hotels are largely imported, indicating substantial market potential. China's nylon engineering plastics industry started relatively late and has developed slowly. However, with the rapid growth in demand due to the development of China's automotive, electronics, and electrical industries, as well as the gradual expansion of application fields, the mechanical manufacturing industry is increasingly applying nylon engineering plastics. Therefore, China's nylon engineering plastics industry is bound to see significant development.

Accelerate the construction of nylon raw material bases and place great importance on the development of nylon applications.

Compared with developed countries, China's nylon industry has developed slowly, which is related to the lagging construction of the nylon raw material industry behind the development of the nylon industry. To ensure that China's nylon industry can develop healthily and steadily, it is necessary to change the situation where raw materials are in short supply and accelerate the construction of nylon raw material bases. The investment in nylon raw material project construction is large, with high requirements for supporting cooperation conditions and long construction cycles. The construction of nylon raw material bases should emphasize expanding and renovating old factories and bases rather than establishing new sites. China already has two sets of caprolactam plants with a scale of 50,000 tons/year; one has been expanded to 70,000 tons/year and both are being planned for expansion to 120,000 tons/year. However, these raw material production enterprises, including the newly commissioned Nylon 66 salt plant by Shenda Group, have high input costs and low output due to historical reasons, which is detrimental to their survival and development while also hindering downstream enterprises' growth. Therefore, it is hoped that relevant national departments will consider favoring these high-investment raw material production enterprises when researching policies such as financial interest subsidies and debt-to-equity swaps.

While accelerating the construction of nylon raw material bases, attention should also be paid to exploring applications in various fields. Effective measures should be taken to promote the development of nylon in four major areas: civilian silk, decorative silk, industrial silk, and engineering plastics, thereby promoting the development of China's nylon industry and narrowing the gap between China and developed countries.