1.2 million tons! hengyi qinzhou project begins trial production, caprolactam-polyamide integration accelerates

On October 22, Hengyi Petrochemical announced that the first phase of the "1.2 million tons per year caprolactam-polyamide integrated industry and supporting engineering project" invested and constructed by its subsidiary, Guangxi Hengyi New Materials Co., Ltd., has smoothly completed the entire process and officially entered the trial production stage.

Source: Hengyi Petrochemical

The Qinzhou project is a key project in the Guangxi Zhuang Autonomous Region and a major integrated production base for caprolactam that Hengyi Petrochemical has been focusing on in recent years. The project is located within the petrochemical park of Qinzhou Port in Guangxi. The first phase of construction covers an area of 1,717 mu. The first phase includes: 2 sets of 400,000 tons/year hydrogen peroxide, 300,000 tons/year synthetic ammonia, 100,000 standard cubic meters/hour hydrogen production, 2 sets of 300,000 tons/year caprolactam, and 2 sets of 300,000 tons/year polyamide polymerization production units. Additionally, it is equipped with smart warehouses, public engineering, heating facilities, and service engineering.

Source: Hengyi Petrochemical

01 Hengyi Petrochemical: From ""A Drop of Oil" Two StrandsFull industry chain layout​

According to public information, Zhejiang Hengyi Group Co., Ltd. was officially established in October 1994, becoming one of the first township enterprise groups in Zhejiang Province following the implementation of the Company Law. In June 1999, Hengyi Group underwent restructuring and reorganization, transitioning from a collectively-owned enterprise to a private enterprise, and entered the polyester industry in the same year. In 2003, the company ventured into the upstream PTA industry of polyester.

Source: Hengyi Petrochemical

In June 2011, Hengyi Petrochemical successfully went public by merging with ST Guanghua. In February 2014, Hengyi Petrochemical signed a joint venture agreement with Damman in Brunei to construct a petrochemical project on Pulau Muara Besar in two phases. In November 2019, the first phase of the Brunei refinery project was put into operation, establishing Hengyi Petrochemical's "one drop of oil, two strands of silk" industrial layout. As of the first half of this year, Hengyi Petrochemical has established a full industry chain layout with a refining capacity of 8 million tons per year, PTA capacity of 21.5 million tons per year in which it holds stakes, polymerization capacity of 13.25 million tons per year in which it holds stakes, PIA design capacity of 300,000 tons per year, and caprolactam stake capacity of 400,000 tons per year. It is a global leader in the integrated full industry chain of "refining—chemicals—fiber."

Based on the operational performance, after experiencing substantial growth in both revenue and net profit in 2023, Hengyi Petrochemical began facing challenges in 2024. In 2024, the company achieved a total operating income of 125.463 billion yuan, a year-on-year decrease of 7.85%; the net profit attributable to the parent company was 234 million yuan, a significant year-on-year decline of 46.28%. The production and sales of its PTA business decreased by 33.47% and 33.56% year-on-year, respectively. The Brunei Phase I refining project incurred a loss of 1.03 billion yuan for the year, becoming the biggest "drag" on performance.

According to the semi-annual report of Hengyi Petrochemical, the company's business operations have not yet improved in the first half of this year, with a revenue of 55.96 billion yuan, a year-on-year decrease of 13.59%, and a net profit attributable to the parent company of 227 million yuan, a year-on-year decrease of 47.32%.

02 The Triple Moat of Technology, Integration, and Product Structure​

Image Source: Hengyi Group

Hengyi Petrochemical introduced in the announcement the three major advantages of the Qinzhou project:

The core competitiveness of the Hengyi Qinzhou project is primarily reflected in​​Technical Advantages​Above.

The project has applied multiple independently developed patented technologies and intellectual property rights of the company on a large industrial scale. The entire preparation process adopts advanced unit technologies and technology combinations, incorporating the latest energy-saving technologies. The production costs are expected to decrease significantly.

The second major advantage of the Hengyi Qinzhou project is​Integrated advantages​​。

The project integrates supporting production factors and energy resources throughout the entire process, significantly optimizing energy and material consumption indicators, reaching industry-leading levels in all aspects. Currently, this integrated model is becoming the standard for leading companies in the industry, but it has also significantly raised the entry barriers for newcomers. At present, most companies are equipped with a complete industrial chain and supporting raw and auxiliary materials, imposing very high requirements on corporate technology, funding, industrial support, and environmental indicators.

The third major advantage of the Hengyi Qinzhou project is​​Product Structure Advantages​​。

The finished products of the project include various products such as civilian fibers, engineering plastics, and films, with a rich and reasonable product structure.

With the continuous development of China's industry, the acceleration of component localization, and the further popularization of nylon films, the demand for nylon is expected to grow. The Hengyi project continues to make efforts in the high-end nylon fiber and engineering plastics fields, targeting the downstream high-end nylon market to achieve differentiated competition.

03 The industry landscape remains tight.，Downstream demand is steadily improving.

From the perspective of market supply and demand structure, on the supply side, 2025 is a year with a relatively high growth rate of caprolactam capacity. However, capacity expansion will slow down in the next 2-3 years. Similar to caprolactam, new capacity additions in the nylon 6 industry are concentrated between 2024 and 2025, having already gradually passed the peak production period, with fewer new capacities in the future.

On the demand side, downstream nylon, with its excellent performance advantages in both fiber and non-fiber fields, is expected to show potential for continuous growth in future downstream demand. In terms of overseas demand, the total export volume of nylon chips is increasing year by year. Additionally, due to the superior performance of nylon products, demand is expected to remain strong in the long term, potentially replacing low-end chemical fiber varieties, and its application fields are expected to continue expanding.

04 Reshape CaprolactamPolyamide Industry Competitive Landscape

The commissioning of the Hengyi Qinzhou project will have a profound impact on the caprolactam-polyamide industry chain.

Upon completion, the project will lead to a leap in Hengyi Petrochemical's nylon 6 chip production capacity, significantly enhancing the company's influence and comprehensive competitiveness in the nylon market. More importantly, the project will facilitate the deepening of the company's integration strategy, further extending the downstream aromatic hydrocarbon industry chain. This will form an integrated layout of the "benzene-caprolactam-nylon" industry chain, achieving efficient coordination and optimal resource allocation throughout the industry chain.

In the context of the current plastics industry facing overcapacity and increasing environmental pressure, Hengyi's integrated model may become the direction for the industry's transformation and upgrading.

Despite promising prospects, the Hengyi Qinzhou project still faces a series of challenges.

The trial production phase is a critical period for shifting the project from construction to commercial operation. The stability of the plant's operation and the stability of product quality both require time for validation. Meanwhile, 2025 is expected to be a year with a relatively high growth rate in caprolactam production capacity, which may put short-term pressure on the market supply-demand balance. In the long term, Hengyi needs to address the cyclical fluctuations of the global chemical industry and the potential impact of emerging industries such as new energy vehicles on the demand for traditional plastic materials.

With the commencement of trial production at Hengyi's Qinzhou project, competition in China's caprolactam-polyamide sector of the plasticization industry has escalated from a mere capacity race in a single segment to a competition of efficiency across the entire industrial chain. In the future, the hallmark of industry leaders will no longer be just scale, but a comprehensive score of technology, integration, product structure diversification, and locational strategy.

Edited by: Lily

Source: Hengyi Petrochemical, Securities Times, Caizhong News Agency, People's Finance News, Sina Finance - Eagle Eye Studio, Value Energy.