An enormous new Nylon 66 factory in Shandong

Shandong Longhua New Material 山东隆华新材 manufactures and distributes chemical products, focusing on plastics and polymers. Established in 2011, the company listed in Shenzhen in 2020 and has a market cap of 5.9 billion yuan ($920 million).

Longhua yesterday announced plans to invest 7.3 billion yuan ($1.1 billion) to construct what will be China’s biggest Nylon 66 factory.

Nylon 66 is used in fibers for textiles, carpets, and injection-molded parts, including auto components and zip ties. It has high mechanical strength and good stability under heat, and was used to make a Remington .22 rifle, the Nylon 66, from 1959 to 1989.

• There are fewer than 100 manufacturers of Nylon 66 around the world, including Mitsubishi and West Michigan Compounding.
• There was a worldwide shortage of Nylon 66 after northern Italian factories, which supply the apparel industry, suspended operations under COVID lockdowns in 2020.
• Longhua’s new factory will be located in Zibo, Shandong Province, and constructed in three phases to allow manufacturing to begin in the next two years.
• When completed in 2028, the facility is expected to produce more than a million tons of Nylon 66 a year.

The context: China currently has a shortage of Nylon 66, caused partly by lack of production facilities and partly by shortages of the materials needed in its manufacture, primarily adiponitrile.

• China produced 390,000 tons of Nylon 66 last year and imported 250,000 tons. China currently only accounts for about 15% of worldwide production.
• China National Chemical Engineering Group broke ground in 2019 on a new adiponitrile plant in Zibo, which is expected to start production this month.
• Longhua also plans to source other needed raw materials locally.

The takeaway: Longhua’s share price went up today even as the markets fell. Investors still apparently believe that there is a great future in plastics!