Cellulose Ether: The Upstream Raw Materials Have a Big Impact, And the Downstream Market Continues to Grow

Cellulose ether is a kind of natural polymer-derived material, which has the characteristics of emulsification and suspension. Among the many types, HPMC is the one with the highest yield and the most widely used, and its output is increasing rapidly.

In recent years, thanks to the growth of the national economy, the output of cellulose ethers in China has increased year by year. At the same time, with the development of domestic science and technology, high-end cellulose ethers, which originally needed to be imported in large quantities, are now gradually localized, and the export volume of domestic cellulose ethers continues to rise. Data show that from January to November 2020, China's cellulose ether exports reached 64,806 tons, an increase of 14.2% year-on-year, which was higher than the total export volume of 2019.

Cellulose Ether Is Affected by Upstream Cotton Prices

The main raw materials of cellulose ether include agricultural and forestry products including refined cotton and chemical products including propylene oxide. The source of cotton linter is very abundant and the supply is abundant.

Cotton occupies a relatively large proportion of the economic structure of commercial agriculture, and its price is affected by many aspects such as natural conditions and international supply and demand. Similarly, chemical products such as propylene oxide and methyl chloride are also affected by international crude oil prices. Since raw materials account for a large proportion of the cost structure of cellulose ethers, fluctuations in the prices of raw materials directly affect the sales prices of cellulose ethers.

In terms of coping with cost pressure, cellulose ether manufacturers usually transfer pressure to downstream industries, but the transfer effect is affected by the complexity of technical products, product diversity, and product cost added value. Generally, companies with high technical barriers, rich product categories, and high added value have greater advantages, and companies will maintain a relatively stable gross profit level; otherwise, companies need to face greater cost pressures. Also, if the external environment is unstable and the product fluctuation range is large, upstream raw material companies are more willing to choose downstream customers with a large production scale and strong comprehensive strength to ensure timely economic benefits and reduce risks.

Downstream Market Structure

With the continuous advancement of science and technology, the downstream demand market will grow accordingly. At the same time, the scope of downstream applications is expected to continue to expand, and downstream demand will maintain steady growth. In the downstream market structure of cellulose ethers, building materials, oil exploration, food, and other fields occupy a major position. Among them, the field of building materials is the largest consumer market, accounting for more than 30%.

The Construction Industry Is the Largest Consumer Area of HPMC Products

In the construction industry, HPMC products play an important role in bonding and water retention. After mixing a small amount of HPMC with cement mortar, it can increase the viscosity, tensile, and shear strength of cement mortar, thereby improving the performance of building materials. In addition, HPMC is also an important retarder for the production and transportation of commercial concrete, which plays a role in locking water and enhancing the rheology of concrete. At present, HPMC is the most important cellulose ether product used in building sealing materials.

The construction industry is a key pillar industry of China's national economy. The data shows that the construction area of houses has increased from 7.08 billion square meters in 2010 to 14.42 billion square meters in 2019, which has strongly driven the growth of the cellulose ether market.

The overall prosperity of the real estate industry has rebounded, and the area of construction and sales has increased year-on-year. Public data shows that in 2020, the monthly year-on-year decline of the newly started area of commercial residential housing continues to narrow, and the year-on-year decline is 1.87%. From January to February this year, the growth rate of the sales area of commercial housing and residential housing rebounded to 104.9%, a considerable increase.

Oil Drilling

The drilling engineering service industry market is particularly affected by global exploration and development investments. About 40% of the global exploration investment portfolio is used for drilling engineering services.

In the process of oil drilling and production, drilling fluid plays an important role in carrying and suspending cuttings, strengthening the hole wall and balancing formation pressure, cooling and lubricating the drill bit, and transmitting hydrodynamic power. Therefore, it is very important to maintain the proper humidity, viscosity, fluidity and other indicators of the drilling fluid in the oil drilling work. The polyanionic cellulose, namely PAC, can play a role in thickening, lubricating the drill bit, and transmitting water power. Due to the complex geological conditions in the oil storage area and the difficulty of drilling, there is a large amount of demand for the PAC.

Pharmaceutical Accessories Industry

Non-ionic cellulose ethers are widely used as pharmaceutical excipients in the pharmaceutical industry, such as thickeners, dispersants, emulsifiers and film-forming agents. It is used for film coating and adhesive of medicinal tablets, and can also be used for suspensions, ophthalmic preparations, floating tablets. Because pharmaceutical grade cellulose ethers have stricter requirements on product purity and viscosity, the manufacturing process is relatively complicated and there are more washing procedures. Compared with other grades of cellulose ether products, the collection rate is lower and the production cost is higher, while the added value of the product is also higher.

Due to the late start of China's pharmaceutical excipients industry, the current overall development level is low, and the industry mechanism needs to be further improved. Among the output value of domestic pharmaceutical preparations, the output value of domestic medicinal dressings accounts for a relatively low level of 2% to 3%, which is far lower than the proportion of foreign pharmaceutical excipients, which accounts for about 15%. This shows that there is still a lot of room for development of domestic pharmaceutical excipients.

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