Phosphorus-based Flame Retardant Market in China Poised for Strong Growth
China continues to play a prominent role in the global flame retardant chemical market in terms of production, domestic consumption as well as direct exports, and is expected to lead in global market growth. Locally produced phosphorus flame retardant chemical is gradually replacing previously popular halogen-containing chemicals in a broad range of applications, particularly in the plastics and rubber sector. Consumption of inorganic flame retardant is also on the rise.
Currently there are five key product types being used in China: phosphorous, brominated, inorganic, chloride and other types of flame retardant chemicals. The majority of fire retardant chemicals used in the plastics & rubber industries act as important additives to PP, PE, PU, engineering plastics for automobile and electronics, as well as flexible PVC. This is closely followed by the electrical & electronics, chemical (mostly coatings), and electric wire manufacturing industries. Other key applications of consideration include chemical, textile, wood processing, paper and more, though the size of demand is relatively low in these sectors.
GCiS China Strategic Research estimates that the domestic market of flame retardant chemical in China is valued at nearly RMB 6.8 Bn, or roughly USD 1.1 Bn, as of the year end of 2014, up by 5.9% over 2013. Roughly 700,000 tons of flame retardant chemicals were produced in China in 2014 and roughly 400,000 tons were consumed domestically.
GCiS observed a tremendously increase in production over the years, especially for phosphorous FR. The largest two domestic companies – who manufacture exclusively phosphorous FR – have listed themselves in the stock market to acquire sufficient financial support needed for capacity expansion. China is a net exporter of FRs, and of the estimated 700,000 metric tons of FR produced domestically, it is estimated that nearly 30% was shipped abroad/exported. For both phosphorous and brominated FR (such as DBDPE and TBBPA which are still permitted), the largest export market are US, EU, South Korea and Japan. In addition to the raw export of FR, a significant amount of FR are exported via the sales of domestically manufactured final products, such as cable, wire, plastic products, electronics, etc.
Figure 1: Revenues and Sales by Product (2014)
Of approximately 400 suppliers active in the domestic market for the target products, 16 can be classified as “large” supplies, with revenues in 2014 of over RMB 100 Mn (excluding exports). The vast majority of suppliers (around 300) are defined as “very small” companies, whose FRC revenues in 2014 were less than RMB 5 Mn. These companies typically manufacture inorganic FR as their main product. Top suppliers in the China market include: Albemarle Corporation, Jiangsu Yoke Technology, Shouguang Weidong Chemical, Zhejiang Wansheng, Clariant, Hsikwangshan Twinkling Star (Hts), Jinan Taixing Fine Chemicals, Chemtura and Sino-Brom Compound (ICL).
Both domestic and overseas fire retardant standards and environmental regulations are the driving forces behind this trend; however, notwithstanding the optimistic expectations of industry participants, weak law enforcement and supervision in China may hinder this transition.
Halogen-based FR have the best polymer compatibility and are considered to be the most effective type of FR; however, this type of FR poses certain environmental and health concerns. In some end-user industries where FR requirements are more rigid than others, such as cable wire and electronics, it is difficult to completely substitute Halogen based FR for other types of FR. While phosphorus FR is not superior to halogen-based FR in terms of fire-resistance efficiency, considering trending concern for environmentally friendly products, the scope and quality of non-halogen products available in China (phosphorus, inorganic-Zinc compounds, Aluminum hydroxide, Magnesium hydroxide), its product technology maturity, as well as its availability and pricing, it is anticipated that phosphorus FR has the strongest potential for growth. Raw material resources are more available in China for phosphorus FR, and technology for this type of FR has been mastered by the domestic companies. Most of the Chinese end-user industries are not yet ready to accept the much more expensive but better performance inorganic FR offered by foreign suppliers, and presently there are no domestic suppliers capable of producing FR that can match foreign quality. To compensate for this, large amounts of low quality inorganic FR manufactured by domestic suppliers are needed to be added to the plastics in order to achieve same results as other types of FR, however, this can worsen the mechanical and electrical properties of the plastics.
In relation to environmental concern, developments are underway for bio based flame retardants, which are both renewable and non-halogenated, in developed market. In China, bio based FR is still at the research stage. Institute of Chemical Industry of Forest Products, CAF has recently developed and tested bio based flame retardant polyester polyols in which the content of renewable raw materials ranges from 40 to 50 percent. This being said, for market in China, it is still far away for bio based flame retardants to have any substantial and commercially deployment. As in China market phosphorus FR is considered superior option to replace halogen-based FR, leading domestic suppliers R&D remains in the area of increasing phosphate content and providing custom FR for engineering plastics, PCB, and PU foams.
Lately regulation development in China still focus on mandating flame retardant standards to be implemented by different downstream products, insulation materials for example. Areas such as foam cushions in furniture are still void with inflammability standards. There is virtually no regulation in China with regards to FR’s impact on environment and human health, with the exception of banning PBB and PBDE usage in electronics products sold in China. Non-halogenated FR are mostly adopted by multinational companies in China following global production and safety standards or exporting manufacturers following regulations such as RoSH and REACH in the EU and California proposition 65 in the US. This explains the slow progress of non-halogenated products substitution but also indicates a large, as yet untapped potential in the Chinese flame retardant market to be exploited in the future. With government start to tackle environment issues on all fronts, we are optimistic about forthcoming standards and legislation to drive the market towards a eco-friendly direction.
The domestic market will grow from RMB 6.8 Bn in 2014 to around RMB 9.1 Bn by 2019, with more evident trend of phosphorous FRC replacing brominated FRC to become the largest product segment by value.
Figure 2: 2014 to 2019 Flame Retardant Chemical Market Size - Chart
The market for FRC as a whole is growing at a rate slightly lower than GDP and GCiS expects that the plastics & rubber industry will remain the largest consumer of FRC in upcoming years. Pointing to an increasing demand for more advanced engineering plastic products as well as plastic products as a whole, experts from inside the plastics industry are highly optimistic about industry growth. The proportion of flame retardant added to plastic products in China is significantly lower than that of other mature markets which presents another potential for growth, provided regulation tightens. Moving forward, phosphorous FRC will be used more frequently, especially in the manufacturing of PU, flexible PVC, PP, PE and other plastic products. Note that compared to phosphorous FRC, brominated FRC are still used more frequently for the manufacturing of general purpose plastics such as PVC and PP, which are intended to be sold domestically given the Chinese government’s lower requirements on fire retardant standards. Brominated FRC is still preferred because of its high fire retardant capability per unit count. But, in terms of performance, advancements to the production and product technology of phosphorous FRC will gradually solve this problem. On the other hand, downward pressure is being placed on the industry coming mainly from the rubber industry, where due to anti-dumping policies, the export of rubber has been prohibited. Additionally, shrinking profit margins caused by increasing manufacturing costs will also slightly compromise demands for FRC in this downstream vertical.
A version of this article was originally published in the May 2015 issue of Plastics and Rubber Asia.
About GCiS China Strategic Research
GCiS (www.GCiS.com.cn) is a China-based market research and advisory firm focused on business to business markets. Since 1997, GCiS has been working with leading multinationals in sectors ranging from technology to industrial markets, medical, chemicals, resources, building and constructions and a few others.