Fluorine chemical industry chain panoramic analysis

Fluorine chemical industry refers to the chemical sub-industry that contains fluorine element in the molecular structure of the products, which is an advantageous industry with characteristic resources in China, and the industrial level has a high status in the international arena. It also provides important auxiliary materials for the development of high-end manufacturing, environmental protection, new energy, new materials and other strategic industries.

In recent years, with the technological progress and the growth of demand, the application fields of fluorine products have begun to penetrate from the traditional industries to new fields such as electronics, energy, environmental protection and biomedicine.

In the field of new energy, fluorine chemical products have become one of the key materials in new energy fields, such as lithium-ion batteries, fuel cells, solar batteries, wind energy and nuclear energy.

According to the statistics of China Chemical Industry Newspaper, there are about 1,000 fluorine chemical-related enterprises in China, and in recent years, China's production of fluorine chemical basic and general-purpose products accounted for more than 55% of the global output, and it has now become the world's largest producer and consumer of fluorine chemicals, with an annual output value of more than 60 billion yuan, and an annual growth rate of the industry of more than 15%.

With the deepening of the application fields of high-performance and high value-added products in the coming years, the momentum of rapid development of China's fluorine chemical industry is expected to continue.

Fluorine Chemical Industry Chain_

_Fluorine Chemical Industry Chain starts with fluorite, and the middle and upper streams are mainly hydrofluoric acid and aluminum fluoride, etc., and extends to four major categories of fluorine refrigerants, fluorine polymers, fluorine-containing fine chemicals, and inorganic fluorine compounds, with the end-products of air-conditioning and automobile refrigerants, industrial fluorine-containing new materials, and extremely important electronic-grade hydrofluoric acid and fluorine-containing materials for semiconductor fields. The end products are refrigerants for air-conditioners and automobiles, new industrial fluorine-containing materials, and electronic grade hydrofluoric acid, which is extremely important in the semiconductor field.

In the fluorine chemical industry chain, as the processing depth of the products increases, the added value and profitability of the products grow geometrically.

Currently, four generations of fluorine refrigerants, fluorine-containing fine chemicals, fluorine-containing polymers and other products are in the beginning and growth stage.

Currently, the largest market volume of fluorine chemical industry is still the traditional refrigerant industry, but fluorine rubber and plastics and fluorine fine chemicals are accelerating the penetration in various fields by virtue of their wide range of applications and excellent characteristics.

Source: Western Securities

Fluorite: the starting point of the fluorine chemical industry chain_Poker Finance App_Fluorite, also known as fluorite, is a crystalline form of calcium fluoride, which is mainly used in new energy, new materials and other strategic emerging industries, as well as in metallurgy, chemical industry, building materials, optics industry and other traditional fields.

Fluorite is a valuable, exhaustible and non-renewable strategic scarce resource, and was included in China's "strategic mineral catalog" in 2016. Among them, acid-grade fluorite fine powder is mainly used as the raw material of the fluorine chemical industry chain, and has an irreplaceable position in the fluorine chemical industry.

From the point of view of the storage and mining ratio, the global and China's fluorspar scarcity has exceeded the rare earths and graphite: according to the United States Geological Survey (USGS) data, in 2020 the global and China's fluorspar mining and storage ratio (the ratio of mining volume and remaining reserves) were 44.29, 10.5, fluorspar remaining time to be used is shorter than rare earths and graphite.

From the regional point of view, China's fluorspar base reserves are concentrated in Hunan, Inner Mongolia, Zhejiang Province. Hunan's mine resources are dominated by associated mines, which are difficult to develop. Inner Mongolia low temperature lasts longer, ore dressing is more difficult. Zhejiang Province, on the other hand, relying on the mature fluorine chemical industry, the development is smooth, forming a complete and mature fluorine chemical industry chain.

China's fluorspar industry due to the early savage growth, over-exploitation of resources, as well as mining enterprises, safety hazards, environmental protection problems, the industry pattern "small and scattered".

From the point of view of the nature of enterprises, China's fluorspar industry is dominated by private enterprises, large-scale, influential enterprises only a few, the industry has a low degree of concentration. At the same time, the downstream fluorine chemical enterprises are difficult to extend upward, there are almost no state-owned enterprises involved in the fluorite industry.

Hydrofluoric acid_

_The main downstream application of fluorite is hydrofluoric acid. Hydrofluoric acid is an aqueous solution of hydrogen fluoride (chemical formula: HF), which contains 38% (mass fraction) HF in its constant boiling with water, a weak acid, a hazardous chemical, and its production process has high requirements for environmental protection and safety.

Hydrofluoric acid is the most important intermediate of fluorine chemical industry, mainly used in the production of organic fluorine chemical products, accounting for about 63%.

Further processing can form fluoropolymers and fluorine-containing fine chemicals, the downstream covers refrigerants, fluoroelastomers, fluorine resins, aluminum fluoride, fluorine-containing fine chemicals, etc., of which the production of refrigerants is the main one.

Refrigerants

_Fluorine refrigerants are prepared from hydrofluoric acid and chlorinated hydrocarbons as raw materials, which are important organic fluorine chemicals, including ODS and its substitutes, with strong chemical stability, excellent thermodynamic properties, and more than 60% of the downstream are used in refrigerators, household air conditioners, automobile air conditioners and other refrigeration fields, and can also be used as plastic foams in polyurethane industry. It is also used as a plastic foaming agent in the polyurethane industry, an electronic cleaning agent in the semiconductor industry and an aerosol in the fine chemical industry.

The international community signed the Montreal Protocol on Substances that Deplete the Ozone Layer in 1987 to protect the ozone layer and phase out ozone-depleting substances. The Chinese government signed the London Amendment to the Montreal Protocol in 1991, the Copenhagen Amendment to the Protocol in 2003, and the Montreal Amendment and the Beijing Amendment in 2010.

China became the world's largest producer and user of ozone-depleting substances after developed countries phased out major ozone-depleting substances as required by the Protocol.

Three generations of domestic refrigerants will soon enter the quota management era

In 2007, the Montreal Protocol reached an adjustment to accelerate the phase-out of hydrochlorofluorocarbons (HCFCs). The use of first-generation refrigerants (CFCs) has been completely phased out worldwide.

According to the adjusted schedule, China should freeze the production and consumption of HCFCs at the baseline level in 2013, cut 10% of the baseline level in 2015, 35% of the baseline level in 2020, 67.5% of the baseline level in 2025, 97.5% of the baseline level in 2030, and completely phase out HCFCs in 2040.

Based on the experience of second-generation refrigerants, the average of downstream use of third-generation refrigerants during 2020-2022 will be the main reference index for future quotas: since 2024, the total supply of third-generation refrigerants in the country will only be reduced but not increased, and the overall quota each year may be allocated according to the market share of each enterprise's sales volume in 2020-2022.

Three-generation refrigerant HFCs products mainly include R134a, R125, R32, R410a (R125 and R32 in a 1:1 blend) and so on.

According to Zhuochuang information data, as of July 2021, China's R32, R125, R134a production capacity reached 413,000 tons, 337,000 tons, 380,000 tons, respectively, compared with the 2017 capacity expansion of 94%, 36%, 48%.

Domestic R32 capacity statistics (as of July 2021):

Source: Zhuochuang Information, Guoxin Securities

Electronic-grade hydrofluoric acid_Poker Finance App_Anhydrous Hydrofluoric Acid or industrial-grade Hydrofluoric Acid can be made into high-purity and ultra-clean electronic-grade Hydrofluoric Acid after purification through distillation, absorption of ultrapure water and ultra-filtration of 0.2 μm or less, and other processes. It is technically difficult.

Electronic grade hydrofluoric acid is mainly used in integrated circuits, solar photovoltaic and liquid crystal display.

Electronic grade hydrofluoric acid is one of the key auxiliary materials in the integrated circuit industry, which is used for wafer surface cleaning, cleaning and etching during chip processing. Its purity and cleanliness have a very important impact on the yield, electrical properties and reliability of integrated circuits.

Based on the purity and cleanliness, it can be categorized into five levels, such as EL, UP, UPS, UPSS, UPSSS, etc., of which UPSS, UPSSS are the two levels of top purity at present.

In the global market for high-purity hydrofluoric acid, Japanese companies are absolutely dominant, with Rising Star Chemical accounting for 63.0% of the market, Daikin for 21.2% and Morita Chemical for 9.2%. After Japan's export restrictions on South Korea, South Korea's integrated circuit industry will suffer a greater impact, is bound to seek other alternative suppliers.

China has abundant hydrofluoric acid production capacity, the distribution of hydrofluoric acid and fluorite producers are similar to the distribution of Jiangxi, Fujian, Zhejiang, Inner Mongolia. Among them, Zhejiang Sanmei, DuoFuDuo, Juhua shares, Jingrui shares and other enterprises have the ability to produce electronic grade hydrofluoric acid.

Domestic electronic grade hydrofluoric acid production enterprises (as of the end of 2020):

Source: Guoxin Securities

Lithium hexafluorophosphate

_Lithium hexafluorophosphate is currently the best overall performance of lithium salts, and also is the most widely used lithium salts commercially, mainly used in new energy vehicles and other lithium battery products. It is mainly used in lithium battery products such as new energy vehicles.

With the downstream demand exceeding the expected growth, lithium hexafluorophosphate has changed the state of overcapacity in the past, showing a high start-up and low inventory coexistence, confirming that the demand has reached an unprecedented scale, which has now reached 80%.

China is the second country after Japan to industrialize lithium hexafluorophosphate.

In 2010, the production capacity of three Japanese companies accounted for 85% of the global production capacity, and only Tianjin Jinniu has 250 tons of domestic production capacity.

In 2011, DuoFuDuo put into production 200 tons of lithium hexafluorophosphate capacity, becoming the first domestic listed company to formally produce lithium hexafluorophosphate, followed by JiuJiuJiu (now YanAnBiKang), TianCi materials and other listed companies have to break through the technological barriers, and put into production capacity.

With the rapid expansion of China's lithium hexafluorophosphate production capacity, China's dependence on imports of lithium hexafluorophosphate has decreased significantly, becoming the largest producer of lithium hexafluorophosphate. According to GGII data, China's lithium hexafluorophosphate shipments accounted for about 70% of the world, the proportion is higher than the positive electrode, negative electrode and diaphragm, lithium hexafluorophosphate remaining market is occupied by Japan and South Korea.

Lithium hexafluorophosphate industry has high barriers to entry, even if the current industry start rate, production upward obviously, but the main increment is still concentrated in the technology is mature, high quality products, customer stability of the leading enterprises.

And, due to the high investment intensity of lithium hexafluorophosphate projects and the long production expansion cycle (generally more than 1.5 years), new competitors need sufficient financial support and the ability to withstand the long return cycle.

The major domestic producers include Tianci Materials, DuoFuDuo, Xintai and JiuJiuJiu. According to Baichuan Yingfu statistics, there are still 108,600 tons of domestic production capacity to be invested in 2021-2024.

In the context of the global electrification 2.0 wave of the era, lithium power batteries reflect high-speed, stable and strong demand, driven by the electrolyte and lithium salt industry from the evolution of a serious surplus → relative surplus → high-end capacity is tight, is expected to be a steady rise in product prices during the year, the next 1 ~ 2 years, lithium hexafluorophosphate and electrolyte will show a good pattern of rising volume and price.

Domestic lithium hexafluorophosphate production capacity distribution:

Source: BCF

From the industry development trend, high-end fluorine rubber, fluorine polymers, fluorine fine chemical industry has become the key direction of the development of the chemical industry in the future, and the related sub-industries and upstream and downstream industries are enjoying a number of national encouragement policies. In addition, fluorine-containing pesticides, pharmaceuticals, fluorine-containing electronic chemicals and other industries are encouraged by the state to develop the industry, in line with the national industrial policy guidance.

With the deepening of supply-side structural reform, the industry's competitive landscape tends to concentrate, while downstream demand resumes steady growth, three generations of refrigerants are expected to usher in a boom reversal of the inflection point. In addition, along with the next few years in the high-performance, high value-added fluorine products and other areas of application, China's fluorine chemical industry is expected to continue the momentum of rapid development.