October 23, 2015    Volume 22, No. 12

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In The Synthetic Fiber Industry, China Fulfills Its 2010 Goals Of World Domination, And Sets New Ones For 2020

By Richard A. McCormack

China has achieved every ambitious goal it set for itself in 2010 as described in its 12th Five-Year Plan (ending 2015) for the chemical fiber manufacturing industry. China now accounts for 70 percent of global production of chemical fibers, up from 62 percent in 2010. It wasn't long ago that the Chinese industry was 20 times smaller than the American industry; now it is 20 times larger.

China has set new goals in its latest Five-Year Plan (its 13th) aimed at dominating the growing global market for advanced high-tech fibers by 2020. It is implementing a strategy to deal with huge overcapacity and slowing demand that it says will persist for the next five years.

The Chinese chemical fiber industry, which produces synthetic fibers such as polyester, nylon, acrylics for textiles and apparel and upholstery, has grown far more than the Chinese government predicted in 2010. This year, the Chinese industry will produce 46 million tons of chemical fiber, 5 million more tons than was forecast (41 million tons) in China's 12th Five-Year Plan. The output for 2015 represents an increase of 49 percent from the 2010 level of 30.9 million tons, according to the China Chemical Fibers Association. Imports of chemical fiber into China have remained at less than a million tons over the past five years and are "negligible relative to domestic production," says the trade group.

But China's success has come at a steep price. Total worldwide production capacity of 93.4 million tons far exceeds global consumption of 71.7 million tons, according to the Japan Chemical Fibers Association. "Excess capacity of 26.4 percent represents a serious gap between production and consumption," and that gap -- while forecast to shrink to 23 percent -- will persist through 2020. "We should always match the production capacity to actual demand and cultivate new markets for chemical fibers," notes the Japanese Chemical Fibers Association.

China has been busy shoring up its entire chemical fiber supply chain. The country has substantially increased production of the raw materials that go into making chemical fibers. In 2010, 59 percent of the industry's raw materials were sourced from within China. That number jumped to 70 percent in 2015.

It has also increased capacity of high-performance fibers, with growth from 5.5 million tons in 2010 to 18 million tons in 2015.

Its bio-based fiber capacity has soared from 600,000 tons to 20 million tons, surpassing the goal it set for itself in 2010 of 16 million tons of capacity by 2015 -- an average annual growth rate of more than 100 percent.

Besides the big increases in output, the Chinese industry has also achieved other important goals that were outlined in the 12th Five-Year Plan, according to a September 2015 presentation of the China Chemical Fibers Association at the 21st China International Man-Made Fiber Conference. It has accelerated research capabilities and achieved "breakthroughs" in the development of high-performance fibers and bio-based chemical fibers.

The industry has been building its brands and has "accelerated the development and application and promotion of new products from chemical fibers" that have been purchased by China's fast-growing fashion industry.

Over the past five years, the Chinese chemical fiber industry has also completed the development and revision of 134 industry standards and has issued "clean production evaluation indices for polyester, recycled polyester, polyimide, viscose fiber, spandex and others," says the trade group's assessment of the 2010 Five-Year Plan.

Over the past five years, Chinese chemical fiber companies had an annual average 3.85 percent profit margin for bulk chemical fibers, and 18.7 percent for fibers used by the fashion industry. "That drove the enthusiasm of the enterprises to develop new products and promoted industrial 'brand-building,' " says the China Chemical Fibers Association.

In 2013, the growth rate for chemical fiber output dropped below the Chinese GDP growth rate. "The contribution of capital-intensive industries to industrial economic growth is gradually [dropping]," according the China Chemical Fibers Association. "Capital efficiency is declining faster than the overall industry."

Further expansion "is limited," says the trade group. "Production overcapacity is leading to declining capital efficiency."

The result is a new set of goals in the Five-Year Plan ending in 2020, including an effort to "improve independent innovation ability" and a plan to promote the "coordinated development of [a] sustainable industry chain."

The industry has set a goal of becoming more international. It intends to "consolidate and enhance the leading position of China's chemical fiber industry in the field of conventional fibers [and] reach the level of developed countries in the field of hi-tech fibers." It aims to reduce total emissions of major pollutants by 20 percent by 2020. Its fiber recycling rate will increase to 30 percent. "By 2020, the proportion of new product output value will increase to 28 percent from 20 percent," says the plan.

Because of the downturn in the both the global and Chinese economies, "the industry has entered a new normal of slow growth and increased competition," says the latest plan. The result will be a slower growth rate of 3.6 percent per year for chemical fiber production. Output is forecast to reach 55 million tons by 2020 (up from 46 million tons in 2015).

China intends to address "structural overcapacity and excessive market competition," says the latest Five-Year Plan. It calls this the "rebalancing stage" in which it intends to "cancel some new projects and reduce the utilization of capacity to balance supply and demand." That will be followed by an "optimization and adjustment stage" intended to "eliminate the backward production capacity, and conduct product development." Once that is accomplished, the industry will enter the "appropriate development stage [to] recover the growth of production capacity."

Over the next five years, according to the plan, the industry should enter a new phase of development in which it will provide its customers with "comprehensive solutions based on developing new designs, by building brands, and offering after-sales services."

The industry will focus on integrating the Internet into production, product development, logistics, management, sales and service functions and will use intelligent manufacturing systems "as its core principal."

It will also focus on the development of high-tech fibers for the aerospace, automotive and industrial products industries. It predicts "a new round of expansion and layout of high-performance fibers." Demand for industrial fibers is projected to grow from the present level of 150,000 tons to 260,000 tons in 2020 and to 500,000 tons in 2030, with the development of new machinery that assures high-quality, low-cost production. Carbon and aramid fibers will be the "key varieties."

The 2020 Five-Year Plan projects growth in Chinese production of carbon fibers (15,000 tons), aramid fibers (18,600 tons), ultrahigh molecular weight polyethylene fibers (12,100 tons), PPS fibers (10,500 tons), basalt fibers (13,000 tons) and polyimide fibers (4,000 tons).

It is planning a major initiative aimed at diversifying raw material sources away from oil and toward crop wastes, marine resources and recycled fibers.

China is also embracing the reinvigoration of the ancient "Silk Road" from Southeast Asia to the Indian Ocean, the Middle East, Africa and the Mediterranean. The justification for its "One Road One Belt" initiative is that "many countries along the road have common interests with China," says the 13th Five-Year Plan. China will "optimize the allocation of resources to form a new pattern of chemical fiber industry to 'Go Out' and the upgrading version of opening to the outside world."

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