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Sulphur 408 Sept-Oct 2023

30 September 2023

China’s troubled transition

Editorial

China’s troubled transition

“We may have reached ‘Peak China’”

All is not well with the Chinese economy. Growth has slowed to a fraction of what it was, only 0.8% in 2Q 2023, and has not bounced back as expected as covid lockdowns were eased. Exports and imports are both falling, debt has reached 300% of GDP, youth unemployment is running at 20%, and the property market is collapsing, with huge property developers like Evergrande and Country Garden only avoiding bankruptcy via government arranged loan restructurings. Consumer prices have fallen year on year, raising the spectre of deflation, and productivity growth has fallen from 4.5% year on year in 2006-7 to around 0.8% today. The yuan is trading at a 16-year low against the dollar.

Coming after four decades of breakneck growth, instituted by Deng Xiaoping’s economic reforms in 1978, the slowdown has a been a return to earth after the boom years, driven in no small part by a huge demographic shift as the long term effects of increased longevity and the One Child policy lead to a rapidly ageing population with fewer new workers to replace those retiring. The government been trying to ease the country’s transition from a low wage industrial economy that is ‘the workhouse of the world’ to a middle income, consumer driven economy, but the property crash is a sign of low consumer confidence and low household incomes.

All of this has had a knock-on effect on commodity markets, which had been rising in anticipation of a Chinese post-covid bounce back. The dislocations caused by economic sanctions on Russia are easing, and with Chinese demand still slack and structural overcapacity remaining in many Chinese industrial sectors, prices are falling again, though there are still some bright spots, such as copper and nickel demand for renewable power and electric vehicles. Low margins at smelters are also leading to some shutdowns, affecting both domestic copper and acid production.

Meanwhile, China’s Belt and Road Initiative, a programme of strategic partnerships and investments, was supposed to secure raw materials for the country’s economic growth, but it has also led to major trade deficits for partner countries who did not see the Chinese market access they had hoped for, while the pandemic led to a buildup of bad debts.

China’s impact on sulphur markets is seeing its own transition, as domestic phosphate production falls, and the country’s sulphur production increases. Chinese MAP and DAP production has fallen by 5 million t/a over the past five years as the government tries to tackle overcapacity, environmental emissions and overapplication of fertilizer, and exports have fallen by a similar amount due to export quotas to keep domestic prices low – DAP exports were just 3.6 million t/a in 2022. At the same time, sulphur production from sour gas and particularly new refineries is rising. Chinese sulphur production has risen from 6.4 million t/a to 9.7 million t/a from 2018-22. For a long time China has been far and away the world’s largest importer of sulphur, and this continues to fall. Sulphur imports for 2022 were down 10% to 7.6 million t/a, and down from 11.7 million t/a in 2019, and stocks remain high. Increased production of sulphuric acid from smelters has also reduced demand for imported sulphur.

In the same way that we are approaching Peak Oil (at least in terms of demand), it is beginning to look like we may have reached ‘Peak China’. New sulphur demand is coming from Indonesia’s nickel production, and Saudi Arabia’s and Morocco’s phosphate industries, and new production from Asian refineries and Middle Eastern sour gas projects.

Richard Hands, Editor

Latest in Asia

Start-up of world’s largest methanol plant

Johnson Matthey (JM) says that the three methanol production trains of Inner Mongolia Baofeng Coal-based New Materials Co., Ltd., a wholly owned subsidiary of Ningxia Baofeng Energy Group, were successfully commissioned in November 2024, February 2025, and March 2025, respectively. Located in the Wushenqi Sulige Economic Development Zone of Ordos City, Inner Mongolia Autonomous Region, this plant employs Johnson Matthey’s advanced methanol synthesis technology and catalysts, making it the largest single methanol plant in the world. Inner Mongolia Baofeng also stands as one of the largest chemical enterprises globally that produces polyethylene and polypropylene by using coal as a substitute for oil.

Jilin Electric Power commissions green ammonia plant

Jilin Electric Power says that it has commissioned one of the world’s largest green hydrogen and ammonia plants in Jilin Province. Jilin says that this is the world’s largest operating green ammonia plant, with a capacity of up to 32,000 t/a of green hydrogen and 180,000 t/a of green ammonia; the largest combined PEM and alkaline electrolyser system, combining 196 MW of alkaline electrolysis and 52 MW of PEM electrolysis, respectively; and the world’s largest block of solid-state hydrogen storage - 48,000 Nm3. The plant is fed by 800 MW of installed renewable power. The green ammonia is EU-certified under low-carbon fuel standards, and offtake agreements are in place with companies located in Europe, Japan and South Korea.

Partnership for sustainable energy solutions

Clariant has signed a strategic cooperation agreement with Shanghai Boiler Works, a full subsidiary of Shanghai Electric specialising in energy conversion and the development of new energy applications, to jointly foster innovation in sustainable energy solutions. The partners will combine their expertise to advance green energy projects in China. The agreement is the result of close and successful cooperation in Shanghai Electric’s new biomass-to-green methanol plant in Taonan, Jilin Province, China. In addition to supplying its MegaMax catalysts, Clariant provided technical on-site support during the successful startup of the 50,000 t/a plant. The second phase of the project, with a capacity of 200,000 t/a green methanol and 10,000 t/a of sustainable aviation fuels (SAF), is expected to start production in 2027. The ceremony for the official signing of the partnership contract took place last week at the Clariant Innovation Center in Frankfurt, Germany.

Biomethanol plant for Kandla

The Deendayal Port Authority (DPA), Kandla, has issued a tender for the engineering, procurement and construction (EPC) contract to build India’s first port-based bio-methanol plant. The 3,500 t/a plant will use oxy-steam gasification technology to convert biomass into bio-methanol. The scope covers design, engineering, procurement, construction, commissioning, and product certification, with bidders required to outline plant life, warranties, capital expenditure, and operating costs. The move follows DPA’s earlier call in May for turnkey proposals for a larger integrated plant of over 15,000 t/a, and its February 2025 agreement with Bapu’s Shipping Jamnagar Pvt. Ltd. to develop India’s first bio-methanol bunkering facility, including a dedicated bunker barge, at Kandla Port.

Study on ammonia fuel storage tanks and transportation equipment

Shipping classification society ClassNK has formed a consortium with IHI Corporation, JFE Steel, Tohoku University, and Institute of Science Tokyo to participate in Japan’s Feasibility Study Program on Energy and New Environmental Technology. The consortium will promote the development of stress corrosion cracking (SCC) probability evaluation tools for fuel ammonia storage tanks and transportation equipment. Initially, the consortium will conduct a detailed study of the SCC mechanism involved in steel cracking due to the combined effects of mechanical stress and corrosion caused by liquid ammonia. Thereafter, the consortium plans to develop tools for easily and accurately assessing SCC probability. Finally, opinions will be solicited from stakeholders to formulate risk-based maintenance procedures for fuel ammonia storage and transportation facilities, and marine fuel tanks ultimately to promote the expanded use of fuel ammonia.