Industry Turning Point? Water Co. Suddenly Announces Postponement

Just as Guoen Co., Ltd. announced its entry into PEEK and other special engineering plastics, Water Co., Ltd. announced a project delay—and for two years. Why is that?

[DT New Materials] has learned that on August 1, Water Group Co., Ltd. issued an announcement stating that, under the premise that the project implementation entity and the intended use of the raised funds remain unchanged, and the total project investment and construction scale remain the same, the company has agreed to extend the expected date for the “Annual Production of 45,000 Tons of Special Polymer Materials Construction Project” to reach its intended usable state from August 11, 2025 to August 11, 2027.

On May 22, 2023, the company issued RMB ordinary shares (A shares) to specific investors, raising a total amount not exceeding RMB 1,195,836,200. The funds were invested in the construction of a special high polymer materials project with an annual output of 45,000 tons, as well as the headquarters base and synthetic biological materials innovation center projects. The actual total raised funds amounted to RMB 599,999,989.68 for the approved construction.

According to the plan, after reaching full production capacity, the polymer materials project constructed by the wholly-owned subsidiary Chongqing Water Intelligence New Material Technology Co., Ltd. will add a production capacity of 20,000 tons per year of liquid crystal polymer (LCP) modified materials, 20,000 tons per year of polyphenylene sulfide (PPS) modified materials, and 5,000 tons per year of high-performance polyamide (PPA) resins and modified materials.

On May 22nd of this year, Water Corporation announced that its Chongqing Intelligent Base had obtained the "Safety Production License," marking the official commencement of production for the first and second phases of the company's project to produce 20,000 tons of liquid crystal polymer (LCP) resin materials annually, as well as the first phase of the project to produce 1,000 tons of polyaryletherketone resin materials annually.

Based on the company’s data as of the end of 2024, the current built production capacity for LCP synthetic resin is 25,000 tons (including the original 10,000 tons, the newly commissioned Phase I with 5,000 tons, and Phase II with 10,000 tons; in addition, there is a planned but not yet commissioned Phase III with 5,000 tons). The built production capacity for specialty nylon series synthetic resins is 5,000 tons (with a designed total capacity of 10,000 tons). The production capacity for polyaryletherketone (PAEK) synthetic resin is 1,000 tons. Polyethersulfone (PSF) has not yet been built (with a planned capacity of 10,000 tons). The production of polytetrafluoroethylene (PTFE) mainly takes place in the subsidiaries Zhejiang Kosei and Shanghai Water Hua Ben.

The company did not specify the reasons for the delay, only stating that it was due to a comprehensive consideration of changes in the external environment and actual needs. However, based on long-term development and industry trends, the company has prudently decided to continue advancing the implementation of the fundraising project.

According to the company's report, the production of the company's specialty polymer materials in 2023 and 2024 is quite similar, at 15,038.44 tons and 15,748.20 tons respectively, with sales of 12,537.19 tons and 14,848.39 tons. There is no significant growth, and it is sufficient relative to the current production capacity. Moreover, in 2023-2024, the sales price of the company's specialty polymer materials continues to decline (with raw material prices remaining relatively stable). A rough calculation of the average annual sales price shows that in 2023 and 2024, it is approximately 66,500 CNY/ton and 62,000 CNY/ton, respectively. This figure was as high as 80,000 CNY/ton in 2022, indicating a noticeable decline.

Specialty polymer materials have significant application potential in high-end markets. For example, LCP can be used in air-cooled heat dissipation materials for AI servers, low-loss films for high-frequency and high-speed communication signals, and antennas; PTFE films are used in high-frequency and high-speed PCB circuit boards; PEEK is used for encapsulating stators in rotating motors for robots.

Although the current consumption of specialty polymer materials is not large, their high added value is their biggest attraction. However, the modified plastics industry has always been highly competitive, and leading peers are also increasing their investments. For example, the most direct competitor, PRET, currently has an annual production capacity of 4,000 tons of LCP resin polymerization, 5,000 tons of LCP compounding modification, 3 million square meters of LCP film, and 1,000 tons (1,000D) of LCP fiber. Recently, it also announced a new planned capacity of 400,000 tons, involving modified PEEK, PPS, LCP, and carbon fiber reinforced materials. In addition, Kingfa Sci. & Tech. has a planned production capacity of 34,000 tons of specialty engineering plastics, with a capacity utilization rate of 68%, and is constructing 15,000 tons of LCP and 8,000 tons of specialty polyamide.

It is worth mentioning that another LCP competitor, JuJia Technology, reported a loss of 46.31 million yuan in 2024 and a loss of 6.09 million yuan in the first quarter of this year. Recently, it sold no more than 20.17% of its shares to Landy Group at a total price not exceeding 121 million yuan.

Looking at the overall external environment, based on the semi-annual reports already released by global giants such as BASF, Dow, Covestro, Evonik, Sinopec, Arkema, Sumitomo Chemical, and many others, almost all of them have experienced a decline. Furthermore, their outlooks for 2025 generally believe that the global economy will continue to be sluggish with no signs of recovery in the short term.

Currently, modified companies such as Kingfa Sci & Tech (+72%), Pret (+66.65%), Silver Jubilee Tech (+83%), NHU (+70%), and Dawn Polymer (+48%) have all released their first-half forecasts, and overall they are quite positive. As for Water, it still needs to wait for specific data to come out to confirm what has happened or adjust its pace in a timely manner to be prepared, as there are rarely many exceptions in the current trend.