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A Fluoropolymer Partner In China

Shanghai 3F finds a global stage by teaming up with several foreign firms

by Jean-François Tremblay
July 14, 2014 | A version of this story appeared in Volume 92, Issue 28

Photo of a Shanghai 3F plant in Changshu, Jiangsu province.
Credit: Shanghai 3F
A partial view of 3F’s facilities in Changshu, where the company operates a plant with DuPont and may operate another one with Solvay.

Many Chinese chemical producers have foreign partners. But Shanghai 3F New Materials appears to have become by a wide margin the favorite Chinese partner of Western fluoropolymer producers. The company has operated a fluorochemicals joint venture with DuPont for several years and is now working with Solvay to set up another production venture.

Nothing obliges these leading foreign companies to team up with 3F. It is somewhat unexpected, in fact. The company is part of a large state-owned chemical producer, a status that suggests rigidity, bureaucracy, and a resistance to adjust to a foreign business partner. Potentially more troubling is that their work with 3F increases the likelihood that the Chinese firm will gain enough expertise to become a global competitor in fluorochemistry. And yet, drawn by the potential of the vast Chinese market, foreign firms are expanding their ties with 3F.

“I’m not trying to be diplomatic, but I honestly find it very easy to work with these people,” says Marco Martinelli, Asia director at Solvay’s specialty polymers business unit. Based in Shanghai for the past year and a half, Martinelli has held numerous meetings with both 3F managers and officials from Shanghai Huayi, the state-owned group to which 3F belongs. “When we have different positions, they listen a lot and show a true willingness to find a reasonable point of equilibrium,” he says.

Last November, Solvay and 3F announced two agreements. The first was a long-term contract for 3F to supply raw materials for fluoropolymers that Solvay makes in Changshu, a city near Shanghai where 3F also operates. The second was an agreement in principle that Solvay will take a minority stake in a polytetrafluoroethylene (PTFE) plant that 3F just built, also in Changshu. The plant will be operated by 3F. Prior to the new two deals, 3F had supplied chemicals to Solvay for several years, Martinelli notes.

DuPont has a longer history with 3F. In 2004, it set up a joint venture with the Shanghai firm, also in Changshu, to produce hydrofluorocarbons for refrigerants and other applications.

In 2011, the companies decided to set up a second venture, this one to produce PTFE and fluorinated ethylene propylene resins. And last year, DuPont said it would acquire a minority stake in Changshu 3F Zhonghao New Chemical Materials, a subsidiary of Shanghai 3F. DuPont declined to provide additional comments for this article.

Credit: Jean-François Tremblay/C&EN
Photo of Wei Jian Hua, vice president at Shanghai Huayi and chairman and president of Shanghai 3F New Materials, a Huayi company.
Credit: Jean-François Tremblay/C&EN

Competent staff, high-purity fluorinated monomers, and strong technological capabilities are the three main reasons that foreign firms make 3F their favored fluorochemical partner in China, according to Wei Jianhua, chairman of Shanghai 3F and a vice president of the Huayi group. “And we have reasonable costs, too,” he claims.

Other than DuPont and Solvay, 3F has solid relationships with several other major fluoropolymer producers that it supplies on a long-term basis, Wei says. For instance, Arkema bought a 10% stake in a 3F plant in Changshu in 2013. And Japan’s Kureha acquired 20% of another subsidiary of 3F in Fengzhen, Inner Mongolia.

In its earliest days, Wei recollects, 3F was known as the Shanghai Organic ­Fluorine Materials Research Institute, a government organization that both conducted research and produced fluorochemicals. It was attached to the Shanghai Chemical Industrial Bureau, which was restructured into the Shanghai Huayi Group in 1996.

Last year 3F recorded sales of $643 million. It has been listed on the Shanghai Stock Exchange since 1992, but Huayi retains a 32% stake in the firm and shares top executives and other resources with it.

Although 3F is not the Chinese market leader across the entire fluorochemical range, Wei claims it is the world’s largest producer of several grades. These include hydrofluoroolefin-1234yf, a material that could become the world’s leading car air conditioner refrigerant, and hydrofluo­rocarbon-152a, an aerosol propellant with an ozone depletion potential of zero.

True to its roots as a research institute, 3F has mostly developed its own manufacturing technologies rather than licensing them from others, Wei says, noting that the company employs a total of 200 researchers. “We’re not short of fluorochemists,” he observes. The company’s labs are partly staffed with Ph.D. candidates who get real-world experience while pursuing their studies at various universities.

The PTFE plant in which Solvay plans to acquire a minority stake from 3F will not be implementing major modifications from Solvay, Martinelli notes. This suggests that for the time being, Solvay managers believe that the processes developed by 3F are sound.

“This plant is totally new, and it utilizes all their previous knowledge and experience accumulated in running their production units,” Martinelli says. Solvay does expect that it might license some of its PTFE technology to the facility so that 3F can produce higher-end grades of the material. “We will aim to improve the quality of the production and also increase the flexibility of the production tools, through a license, in a second phase of the joint venture,” he adds.

China, the world’s largest user of PTFE and a major consumer of other fluoropolymers, is a strategic market for Solvay, according to Martinelli. The company operates larger fluoropolymer facilities in Europe and North America but didn’t have any in Asia. “Asia is already one-third of our sales, and it will continue to grow faster than Europe or North America,” Martinelli says. “We want to capture not only the market growth, but also the loyalty of our customers.”

Despite the strength of China’s fluoro­polymer market, Wei is cautious about the medium-term outlook for 3F. Several of its products are gradually being phased out in China for being ozone depleters. As a developing country, China was granted an extension to comply with the Montreal Protocol on Substances That Deplete the Ozone Layer, but China is moving toward full implementation of the international agreement by next year. Several Chinese competitors of 3F have already shut down facilities.

“We’re ramping up production of newer materials such as HFO-1234yf, but our sales, and particularly our exports, will be affected in the short term,” Wei says.

Over the longer term, however, the outlook for 3F is promising, Wei argues. Orders from foreign fluoropolymer makers should continue to grow. “Products made with raw materials from China are far cheaper,” Wei says, noting that foreign companies are relentlessly pressured by their shareholders to generate ever higher returns.

Moreover, the growing presence in China of international companies is allowing 3F to get used to global competition. The company has become familiar with Western fluoropolymer makers both by working with them and by competing against them in China. As an accommodating Chinese partner today, 3F could well become a hard-to-beat global competitor tomorrow.  


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