China's fluorine chemical industry: important policy impacts in 2016

At the beginning of spring 2017, Ximei CCM specially compiled the important policy impacts faced by China's fluorine chemical industry in 2016, mainly including fluorite resource tax reform, substitution of fluorine-containing refrigerants, trade anti-dumping, and industrial development planning.

1、 Reform of fluorite resource tax

On July 1, 2016, the fluorite resource tax was officially changed from quantity based (20 yuan/ton) to price based, with a tax rate range of 1-6%; The tax basis will be adjusted from the sales volume of raw ore to the sales volume of raw ore and concentrate (or raw ore processed products).

At the same time, national government departments will comprehensively clean up mineral resource related fee funds and strengthen tax preferential policies. Ximei CCM believes that this will help alleviate the burden on domestic fluorite enterprises and assist in the recovery of the fluorite market.

2、 Fluorinated refrigerant replacement

In January 2016, China issued a redistribution of production and usage quotas for hydrochlorofluorocarbons (HCFCs) in 2016. Unlike the 10% year-on-year reduction in 2015, Ximei CCM found that the domestic production quota for HCFCs in 2016 remained the same as in 2015. Among them, the production quotas for dichlorodifluoromethane (HCFC-22), dichlorodifluoroethane (HCFC-142b), and dichlorodifluoroethane (HCFC-142b) are 274279 tons, 66313 tons, and 22845 tons, respectively.

However, as the beginning of China's second phase of HCFCs phase out management in 2016, the country is expected to achieve a 35% phase out target within the next five years, and it is foreseeable that the production quota will remain stable only temporarily.

In terms of use quota, the use quota of refrigeration and air conditioning industry and polyurethane foam industry in 2016 was much lower than that in 2015:

-The quota for the use of HCFC-22 in the refrigeration and air conditioning industry is 67059 tons, a year-on-year decrease of 8.83%

-The quota of HCFC-141b in polyurethane foam industry was 2665 tons, a year-on-year decrease of 27.25%

At the end of August 2016, the Environmental Protection External Cooperation Center (FECO) released a new version of the "Recommended Catalogue of Key Substitutes for Hydrochlorofluorocarbons (HCFCs) (First Batch)" (draft for comments). According to the opinion draft, Westinghouse CCM believes that natural refrigerants will dominate the future path of replacing HCFCs, including propane (R290), isobutane (R600a), carbon dioxide (R477), ammonia (R717), and cyclopentane.

On October 10, 2016, the 28th Meeting of the Parties to the Montreal Protocol was held in Kigali, the capital of Rwanda, where representatives discussed and adopted amendments to the Protocol on the Reduction of Hydrofluorocarbons (HFCs).

Ximei CCM believes that the passage of this amendment is a wake-up call for the domestic HFC industry. Domestic HFC manufacturers need to accelerate the optimization of existing production capacity, eliminate idle capacity, and achieve cost reduction and efficiency improvement; Increasing research and development investment in new alternatives such as hydrofluoroalkenes (HFOs) will be a top priority for future development. Meanwhile, it is foreseeable that natural refrigerants will emerge as a rising force, continuously eroding the market share of HFCs in the coming years.

On November 27, 2016, the 77th meeting of the Executive Committee of the Multilateral Fund for the Montreal Protocol was held in Montreal, Canada. The second phase elimination management plan of four HCFCs consumer industries (industrial and commercial refrigeration and air conditioning industry, room air conditioner industry, polyurethane foam industry and extruded polystyrene foam industry) submitted by China was approved.

In addition to the approved plans for the refrigeration maintenance and cleaning industries at the 76th meeting, China's second phase of the HCFCs phase out management plan will receive funding from the Multilateral Fund of over 500 million US dollars.

3、 Anti dumping measures in trade

On August 5, 2016, the United States International Trade Commission (USITC) sent the final ruling on the anti-dumping case of Chinese hydrofluorocarbons (HFCs) (mixtures and their components) to the United States Department of Commerce (USDC).

Among them, USITC has made a positive final ruling on anti-dumping industry injury against HFC mixtures imported from China; Make a negative anti-dumping industrial injury ruling on HFC monomer components.

Therefore, the United States will impose anti-dumping tariffs on China's HFC blends in the later stage, but not on HFC monomer components

HFC mixtures include: R404A (a mixture of pentafluoroethane (HFC-125)/trifluoroethane (HFC-143a)/1,1,1,2-tetrafluoroethane (HFC-134a)), R407A (a mixture of difluoromethane (HFC-32)/FC-125/FC-134a), R407C (a mixture of HFC-32/FC-125/FC-134a), etc;

HFC monomer components include: HFC-32, HFC-125, HFC-143a, etc

At the end of September 2016, USDC made a preliminary positive anti-dumping determination on imported 1,1,1,2-tetrafluoroethane (HFC-134a) from China, with a dumping margin of 137.23-188.94%. However, in December 2016, the USDC revised the preliminary anti-dumping determination on imports of HFC-34a from China: the weighted average dumping margin for all Chinese exporters/producers was increased to 232.30%.

Meanwhile, it is expected that the USDC will announce the final anti-dumping ruling in February 2017, while the USITC will make the final industrial injury ruling in March 2017.

Ximei CCM believes that China still has a high chance of winning the HFC-34a anti-dumping case. On the one hand, based on the previous successful experience, it will help domestic HFC-34a manufacturers better cope with this lawsuit; On the other hand, combined with the recovery of the domestic HFC-34a market this year, it will further strengthen the determination of industry manufacturers to unite and actively respond to lawsuits.

4、 Industrial Development Plan

In August 2016, the 13th Five Year Plan for China's fluorine chemical industry established industry goals: the next five years will be the sprint stage for the transformation and upgrading of China's fluorine chemical industry. The entire industry will enhance its independent innovation capabilities, improve its overall technological level, develop high-end products, extend its industrial chain, and strive to become a fluorine chemical powerhouse with a more reasonable industrial structure, significantly enhanced development potential, and risk response capabilities by 2020.

Specifically, downstream industries such as automotive, electronics, light industry, new energy, environmental protection, and aerospace have an urgent demand for high value-added and high-performance fluorinated chemicals, including mid to high end fluorinated polymers, new refrigerants (HFOs series), fluorinated fine chemicals, and fluorinated coatings, which have significant development potential.

On October 18, 2016, the Ministry of Industry and Information Technology of China officially released the "Development Plan for Petrochemical and Chemical Industry (2016-2020)". Among them, Ximei CCM pays special attention to the innovative development of new chemical materials related to the fluorine chemical industry, with the following key information:

1. The fluorosilicone material industry is promoting the industrialization process of phenyl organosilicon monomers; Focus on developing high-end fluorosilicone resin and rubber, fluorine-containing functional film materials, high-quality fluorosilicone fine chemicals (high-purity electronic chemicals), fluorosilicone surfactants, fluorosilicone intermediates, etc; Accelerate the development of low global warming potential (GWP) alternatives to ozone depleting substances (ODS)

2. The development of functional membrane materials industry includes high-end lithium battery separators, flexible packaging film materials, polyvinyl fluoride (PVF) and polyvinylidene fluoride (PVDF) backsheet films, fluorine-containing proton exchange membranes, and polarizing films for thin-film transistors and liquid crystal displays

3. The development of liquid crystal materials (fluorine-containing liquid crystal intermediates) for flat panel displays in the electronic chemical industry; Developing new lithium salts for lithium batteries, such as lithium bis (trifluoromethanesulfonyl) imide (LiTFSI), and new electrolyte solvents, such as fluorinated vinyl carbonate (FEC)

On December 19, 2016, the State Council of China released the "13th Five Year Plan for the Development of National Strategic Emerging Industries", which comprehensively deployed and arranged the development goals, key tasks, policy measures, etc. of China's strategic emerging industries during the 13th Five Year Plan period (2016-2020).

Ximei CCM believes that the fluorine chemical industry is closely related to strategic emerging industries and is expected to follow its rapid development to gain new driving forces for development. For example, the core component of new energy vehicles, the power lithium battery, requires a variety of fluorine-containing chemicals to be matched, mainly including polyvinylidene fluoride (PVDF) binder, PVDF coating, lithium hexafluorophosphate (LiPF6), lithium bis (trifluoromethanesulfonyl) imide (LiTFSI), etc.

The author of this article has been engaged in research and consulting work on the Chinese fluorine chemical and lithium battery markets for over 3 years, covering research areas such as fluorite, hydrofluoric acid, aluminum fluoride, fluorine-containing refrigerants, fluorine-containing polymers, and fluorine-containing fine chemicals; Lithium batteries and their key materials (positive electrode materials, negative electrode materials, electrolytes, separators), etc.