In recent years, the fluorochemical business in the developed countries, restricted by the fluorite resources which has been consumed largely and exhausted, has gradually transferred to the developing countries, by giving full play to their technological advantage. This has significantly made an alternation of the global fluorochemical distribution. In addition, pressured by the environmental protection, many ozone depleting substances (ODS) have been eliminated gradually. Specifically, the technological upgradings in industries of building materials, vehicle, pharmaceuticals and alternative energy, have promoted the adjustment of fluorochemical structure: demand for ODS substitutes, high performance fluoropolymer and fluorine-enriched fine chemicals, etc. are increasing distinctly.

The change in the global distribution of fluorochemical business is a challenge but also an opportunity to China.

In view of the domestic fluorochemical business, the construction of low- and medium-marketed projects was repeatedly carried out for short run profit, which resulted in the low utilisation of resources. Together with the deficient independent creativity and the lack of premium-marketed production technology, the industry finally is trapped in the status quo of excess low- and medium-marketed production capacity and insufficient premium one. Since 2012, the overall market has entered a downturn, now at sluggish but stable stage.

For instance, the operating rates of some mainstream fluorochemicals in 2015 were as follows, according to CCM’s research:

The high idle rate and the severely imbalanced supply and demand, pulled down the prices, and further involved the market in depression throughout the year. Specifically, the price of R22, which rose by nearly 40% in 2014, fell largely in 2015, by 34.77% in Dec. over Jan.

Ex-works prices of selected fluorochemicals in China, Jan. vs Dec. 2015

Source: CCM

CCM believes that the fluorochemical industry has stepped into transformation and upgrading, and has come to the key period for structural adjustment: to level up the access threshold and to encourage enterprises to develop fine and deep processing high performance fluorochemicals.

Many industry insiders agreed to this point, according to CCM’s research: “They should strengthen the protection and promote the integration of fluorite resources, and accelerate the exploitation and utilisation of low grade fluorite resources, and meanwhile should enlarge the input in R&D, improve the innovation capability, grow for differentiation and extend supply chain, to step by step develop refined and specific chemicals and achieve scaled development, if the fluorochemical enterprises intend to increase the added value and profit margin, and enhance the capability to resist risks”.

Specifically, fluorine-enriched pharmaceuticals, fluorine-enriched pesticides and high performance fluorine-enriched materials have become star products.

Take fluorine-enriched pharmaceuticals for example. In the US, there were 10 medicines on hot sale in 2014, of which the 3 small molecule ones were all fluorine enriched, combined sales beyond USD20 billion. Currently, the sales of pharmaceuticals are growing at around 10% annually, sales of fluorine-enriched pharmaceuticals also expected to increase continuously.

“The R&D of new medicines with natural products as precursors and through fluorisation reconstruction will become a new direction for medicine R&D, and the secondary innovation based on former medicines and through fluorisation reconstruction will be a short cut for the rapid R&D of new medicines. The competition for fluorine-enriched active pharmaceutical ingredients and for off-patented medicines will be very fierce”, said Lu Shoufu, president of Shanghai AQBioPharma Co. Ltd. at the 1^st Forum for Coordinated Innovation of Green Fluorochemical Technology in Dec. 2015.

In addition, lithium hexafluorophosphate (LiPF₆) as a high performance fluorine-enriched material, thanks to the high technology access threshold and the connection with the explosively growing alternative energy vehicle market, shows short supply. In particular, its price was USD13,070/t (RMB85,000/t) in early 2015, and then was up by 135% to USD30,754/t (RMB200,000/t) in early Dec., due to the insufficient production capacity. At the end of Dec., Jiangsu Jiujiujiu Technology Co., Ltd., a leading producer in China, took the lead to make a quotation of USD39,980/t (RMB260,000/t). Accordingly, its contract is signed once a month, indicating further up-regulation in future.

The appearance of such “high profit” and “refined and deep processed” star products has brought dawn to the struggling fluorochemical enterprises. Meanwhile, enterprises have begun to optimise their business structure and establish production capacity. LiPF₆ in particular, is feted by the enterprises.

It is predicted that the LiPF₆ price will continue rising in 2016. Accordingly, it takes a long time to expand capacity (usually 12-18 months) for LiPF₆. The domestic fluorochemical enterprises mostly started the construction or expansion of production capacity in Q4 2015. This means that in 2016, there will be very limited new capacity put into operation. In addition, the downstream alternative energy vehicle market will continue vigorous development this year – the LiPF₆ supply gap will be enlarged.

Selected LiPF6 production capacity expansion plans in China, 2015

Source: Company announcements & CCM

About CCM:

CCM is the leading market intelligence provider for China’s agriculture, chemicals, food & ingredients and life science markets. Founded in 2001, CCM offers a range of data and content solutions, from price and trade data to industry newsletters and customized market research reports. Our clients include Monsanto, DuPont, Shell, Bayer, and Syngenta. CCM is a brand of Kcomber Inc. More about CCM, please visit www.cnchemicals.com.

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