NMP, also known as N-methylpyrrolidone, is a colorless transparent liquid with good chemical and thermal stability, high boiling point, non corrosive, low toxicity, low volatility, and biodegradability. According to application, NMP can be divided into microElectrical levelThere are four levels: electronic grade, pharmaceutical grade, and industrial grade.

NMP is mainly used in many industries such as petrochemicals, plastics, pharmaceuticals, pesticides, dyes, and lithium-ion battery manufacturing. It is widely used for aromatic hydrocarbon extraction, purification of acetylene, olefins, and dienes, as well as solvents for polymers and media for polymerization reactions, such as engineering plastics such as polyamide, polyimide, polyphenylene sulfide, and aramid fibers. In addition, it is also used in insulation materials, pesticides, pigments, electronic product production, and cleaning agents.

The main application areas of NMP

Source: Observation and Research Report Network

2、 Current situation of industry market size

1. Market size

With the proposal of the development goals of "carbon peak and carbon neutrality", the new energy vehicle industry is developing rapidly. Compared with traditional batteries, lithium batteries have the advantages of small size, light weight, multiple charging cycles, and long service life, making them the preferred choice for new energy vehicle power batteries. In the past year, their prices have increased by over 400%.

In recent years, due to the rapid development of the lithium battery industry, the consumption scale of NMP has grown rapidly. The consumption of NMP in China in 2022 is about 601000 tons, of which the consumption of lithium batteries accounts for more than 90% of the total consumption in China. With the continuous expansion of the new energy vehicle market, the demand for lithium batteries has also increased. Driven by the lithium-ion battery industry, the market size of China's NMP industry continued to increase from 2018 to 2022, reaching 28.88 billion yuan in 2022.

Data source:Observation and researchReport Network

2. Supply scale

In recent years, the NMP layout of major enterprises in China has shown strong momentum. In 2022, China's synthetic NMP production capacity was 532000 tons/year, accounting for 77% of the global total synthetic NMP production capacity. At present, there are a total of 16 synthetic NMP production enterprises in China, of which 8 have a synthetic production capacity of 30000 tons/year or more, with a total production capacity of 427000 tons/year, accounting for 80.3% of the total synthetic NMP production capacity in the country, and the industry concentration is relatively high. Representative production enterprises include Changxin Chemical, Zhongrun Chemical, Binzhou Yuneng, Maiqi Chemical, Jingrui New Energy, etc.

Most of the synthetic NMP production enterprises in our country have the ability to recover and process NMP. The business model of recovering NMP is mainly based on material processing and supplemented by feed processing. In 2022, there are approximately 9 production enterprises in China that have both NMP synthesis and recycling processing capabilities, with a total recycling capacity of 375000 tons per year.

In addition, there are many enterprises in China that only engage in NMP recycling and processing business, with a total recycling capacity of 900000 tons/year in 2022. Enterprises with large recycling capacity include Suzhou Ruihuan (80000 tons/year), Changzhou Huantong Energy Technology (62000 tons/year), Jiangsu Tata (60000 tons/year), Hubei Jinquan New Materials (60000 tons/year), and Zhenjiang Xinna Environmental Protection (40000 tons/year).

Data source:Observation and researchReport Network

3. Demand scale

Driven by the rapid development of new energy vehicles in China, the market size of lithium-ion batteries, especially power batteries, will grow rapidly, thereby driving the sustained and rapid growth of NMP consumption. Preliminary estimates suggest that the demand for NMP in China will reach 601000 tons in 2022.

Data source:Observation and researchReport Network

4. Supply and demand balance analysis

The entry threshold for the NMP industry is relatively low, attracted by interests, and the number of enterprises entering the layout is constantly increasing. The industry scale is constantly expanding, and the phenomenon of overcapacity is becoming increasingly prominent. However, the development of China's NMP industry structure is unreasonable. Due to the large number of small and medium-sized enterprises and low technological level, the industry has excess low-end production capacity and insufficient high-end production capacity. By 2021, China's NMP production and sales rate has reached 95.59%, and the situation of overcapacity in the NMP industry has not changed.

Data source:Observation and researchReport Network

There are two ways to solve overcapacity: one is to reduce production capacity, and the other is to increase the demand for NMP in society. For enterprises that have already formed production capacity, they are generally high-quality enterprises. Enterprises that cannot operate normally due to overcapacity cannot be regarded as "zombie enterprises", and enterprises that cannot operate normally due to overcapacity should be treated as "zombie enterprises" and all removed under the pretext of reducing production capacity, which will cause waste of social resources. Meanwhile, according to the principle of relativity of overcapacity, as long as society increases demand for related products and solves the structural imbalance between supply and demand, overcapacity can be easily resolved. So the fundamental way to solve overcapacity is not to reduce inventory or production capacity, but to increase social demand, which is what we mean by using increment to resolve inventory.

3、 Industry competition pattern

According to the research report website《Research on Development Trends and Future Prospects of China's NMP Industry (2023-2030)》It is shown that the current mainstream NMP production process in China is the non catalyst synthesis method. Compared with the catalyst synthesis NMP technology, this process has lower difficulty and shorter production increase cycle. However, high temperature and high pressure conditions require high equipment requirements, high operating energy consumption, and high safety level. Therefore, there is a certain gap in production cost and product quality compared to the widely used catalytic synthesis process abroad, and the overall competitiveness is relatively weak. In addition, expanding production requires meeting higher requirements, and the expansion cycle for enterprises with existing production standards and NMP capacity is about 1-2 years.

At the same time, the main customers of the NMP industry are well-known domestic enterprises with high customer stickiness. Once cooperation is reached between enterprises, they will maintain a significant advantage in fierce industry competition. In the current domestic market competition, the main focus is on direct manufacturers, recycling and purification manufacturers, as well as a small number of import and export traders. Recycling and purification manufacturers occupy a dispersed customer base and low-end market, while direct manufacturers occupy the main customer base and high-end market.

In terms of competitive landscape, with the increasingly mature process technology of domestic manufacturers, product quality can be improved, while the advantages of foreign competitors such as BASF and Mitsubishi Chemical have declined. At present, the domestic competition is mainly between direct manufacturers, recycling and purification manufacturers, as well as a small number of import and export traders. Recycling and purification manufacturers occupy a dispersed customer base and low-end market, while direct manufacturers occupy the main customer base and high-end market.

At present, the competitive groups in China's N-methylpyrrolidone (NMP) industry can be roughly divided into two categories: the first is enterprises with strong competitiveness, such as BASF from Germany, Mitsubishi from Japan, ASland from the United States, and Mickey Chemical. These enterprises are generally larger in the market, with long working hours and strong technological research and development capabilities. They have advantages in capital and channels, and strong competitiveness. The second competitive group is small and medium-sized N-methylpyrrolidone (NMP) enterprises, which have a large number and small scale. Their brand influence is not significant, their technology is average, and the quality of N-methylpyrrolidone (NMP) products varies.

4、 Industry development trends

As China faces the requirements of industrial structure adjustment during the economic transformation period, the new energy and new materials industry has received strong support at the macro level. The demand for lithium-ion batteries and polymer new materials such as aramid is growing rapidly, and the increase in downstream market demand will directly drive the demand for solvents such as NMP as auxiliary materials.

（1） On the basis of stable growth in consumer electronics lithium batteries, small capacity power lithium batteries are expected to significantly benefit from replacing lead-acid batteries in the fields of electric tools and electric bicycles; Municipal public electric vehicles are experiencing rapid growth in demand with direct and strong government support; On the basis of the above, with the continuous reduction of costs and continuous improvement of technology, the cost-effective power lithium batteries are also experiencing explosive growth in the private electric vehicle field.

Based on policy support from governments of various countries and active promotion from automobile manufacturers, the development of lithium batteries and related industries will face huge development opportunities in the future. The electric vehicle market will become a new profit growth point for the chemical solvent industry, which is one of the upstream industries of lithium batteries.

（2） NMP is not only one of the key upstream materials in the new energy industry, but also an essential chemical solvent for participating in chemical reactions and dilutions in the manufacturing process of polymer materials such as aramid, polyphenylene sulfide, and polyimide. It directly affects the smooth completion of low-temperature condensation reactions and material product transportation.

Aramid was first successfully developed and industrialized by DuPont in the 1960s. Currently, both the research and development level and the scale production industry of aramid abroad have matured. In the field of aramid fiber production, the development of para aramid fiber is the fastest, with production capacity mainly concentrated in Japan, the United States, and Europe. The main production enterprises include DuPont in the United States and Emperor Corporation in Japan. DuPont in the United States has shown significant advantages in the research and development of new products and production specifications.

Aramid is a high-tech specialty fiber with the fastest development and excellent comprehensive performance among high-temperature resistant fibers in the world today. This type of fiber is soft and lightweight, with good insulation, acid and alkali resistance, and high-temperature resistance. As an indispensable basic material in high-tech fields such as aerospace, national defense, and electronic communication, aramid demonstrates a country's technological strength in a sense. Previously, although only a few countries in the world, such as the United States, Japan, and Russia, mastered its industrialization technology, China's demand for aramid was completely dependent on imports. With the rapid development of the national economy in recent years, the domestic demand for aramid and its products has increased rapidly at a rate of nearly 30% per year. In recent years, the localization of aramid in China has also accelerated the development and industrialization process, with continuous breakthroughs and expansion of equipment scale, and narrowing the gap in product quality and variety with foreign enterprises. In addition, in recent years, China's industrial restructuring has provided strong support for the new materials industry. In the next 3-5 years, the rapid development of the polymer new materials industry will inject more force into the increasing demand of the NMP market.

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