In 2007, the domestic paste resin production capacity grew from 390,000 tons per year to 500,000 tons per year. It is estimated that the actual production reached around 388,000 tons, with sales reaching 383,000 tons. Both production and sales saw a year-on-year increase of approximately 25%. However, the market in 2008 was expected to face both favorable and unfavorable conditions, with significant fluctuations and intense price competition likely to occur.
Throughout 2007, the price of paste resin experienced considerable volatility. The first half of the year showed a more stable and upward trend compared to the second half. In the first quarter, prices remained relatively stable, with the mainstream ex-factory price ranging between 9,800 and 10,400 yuan per ton. By the second quarter, prices began to rise, with the mainstream ex-factory price moving between 10,200 and 10,700 yuan per ton. In the third quarter, prices remained steady, hovering around 10,100 to 10,600 yuan per ton. However, by the fourth quarter, prices dropped significantly, with the mainstream ex-factory price falling to between 9,600 and 10,300 yuan per ton.
Looking back at 2007, the domestic paste resin market exhibited five major trends. First, there was a surge in production expansion, with over 115,000 tons of new capacity added annually, marking an unprecedented scale of growth. Second, the export tax rebate rate for paste resin was sharply reduced from 11% to 5%, which severely impacted exports and affected downstream export-oriented enterprises. Third, high international oil prices led to elevated costs for oil-based products like vinyl chloride and ethylene dichloride, increasing the cost of imported paste resins and reducing their volume, thus lessening their impact on the domestic market. Fourth, rising electricity prices and environmental regulations constrained production, while calcium carbide shortages and price hikes increased production costs for manufacturers. Lastly, the price gap between domestic and imported paste resins remained significant.
As we look ahead to 2008, the paste resin market presents both opportunities and challenges. Favorable factors include the continued high level of international crude oil prices, which will keep the cost of imported ethylene oxychloride paste resins elevated, supporting domestic market stability. Additionally, rising electricity and environmental costs are expected to drive up domestic calcium carbide prices, providing further support to paste resin prices. Demand from downstream industries such as automotive leather, wallpaper, advertising fabrics, and toys is also expected to grow, especially with the upcoming Beijing Olympic Games in 2008, which is likely to boost market activity.
However, several unfavorable factors remain. The pressure from market expansion is significant, as major producers like Zhangzhou Huaxiang Chemical Co., Ltd. plan to expand their capacity further, increasing total production to 100,000 tons per year. New projects, such as a 40,000-ton-per-year plant by Hubei Yichang Sanshui Investment Co., Ltd., will add to the supply. Moreover, the reduction in import tariffs last year is expected to continue affecting the market, testing domestic manufacturers and export-oriented users. The introduction of stricter quality standards will also raise production requirements. Lastly, the potential appreciation of the RMB could negatively affect exports, leading to increased domestic supply and intensified price competition.
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