China's Huayi Group Reports Steep Losses Amid Industry Overcapacity and Plant Closure

Financial Performance

China Huayi Group has reported a net loss attributable to shareholders of RMB 92.7736 million for the third quarter of 2025, a severe year-on-year decline of 144.50%. For the first nine months of the year, net profits also saw a significant drop of 42.68%. The company attributes this sharp reversal in fortunes to dual pressures: a widespread decline in product prices and the permanent shutdown of its Shanghai Wujing facility.

Shanghai Plant Closure

On 12 September, Huayi Group announced the permanent closure of facilities at the Wujing base operated by its wholly-owned subsidiary, Shanghai Huayi Energy Chemical Co., Ltd. ('Shanghai Energy Chemical'). The shuttered units primarily produced methanol, with a designed capacity of 950,000 tonnes per year and a 2024 capacity utilisation rate of 46.5%, and acetic acid, with a designed capacity of 700,000 tonnes per year and a 2024 utilisation rate of 70.7%. These facilities were constructed some time ago.

Industry Context and Historical Profitability

China's acetic acid industry has grown into one of the world's largest producers and consumers. In 2024, the country's acetic acid production capacity and output both surpassed 10 million tonnes. The industry is characterised by leading players, including Huayi Group, Hualu Hengsheng, Jiangsu Suopu, Celanese, and Hengli Petrochemical, with high concentration and few new entrants, who typically seek strategic positions within the industrial chain.

Historically, acetic acid has been a profitable sector. From 2018 to 2021, prices followed an upward trend. The product's profitability was notable, especially during 2021-2022. In 2021, the average theoretical profit for acetic acid in East China reached approximately RMB 3,999 per tonne, with a profit margin of around 59.7%. Although profits moderated in 2022 to an average of RMB 1,097 per tonne, the profit margin remained a highly competitive 26.9%. This strong profitability drove capacity expansion, with many new projects, after going through research and construction phases, starting up in 2025 and more expected from 2026 to 2027.

Current Market Dynamics and Soaring Capacity

The current acetic acid market faces structural supply-demand imbalances. Recent price data reflects this pressure; on 23rd October, the acetic acid price index was 2,474.29, down 18.57 from the previous working day, a decrease of 0.74%.

Substantial new capacity is coming online in 2025. Hebei Jiantao's second-phase 800,000-tonne/year facility and Jingmen Qianxin's 600,000-tonne/year plant have commenced operations. Concurrently, the relocation of Shanghai Huayi's capacity will result in a net annual increase of 300,000 tonnes. These additions will elevate China's total acetic acid production capacity to 13.56 million tonnes, a 14.8% increase from the end of 2024.

Furthermore, Xinjiang Zhonghe Hezhong's 600,000-tonne/year facility and Zhejiang Petrochemical's 1 million-tonne/year facility are completed and in trial operation. Guangdong Shengyuanda's 1.5 million-tonne/year facility is expected to start production in the fourth quarter. By the end of 2025, China's annual acetic acid production capacity is projected to approach 17 million tonnes.

Growing Reliance on Exports

With rising domestic supply, exports have become a crucial outlet. In 2024, China's glacial acetic acid exports reached 1.123 million tonnes, a year-on-year increase of 34.1%, while imports fell by 30.6%. This trend continued into 2025, with exports totalling 625,900 tonnes in the first seven months. Full-year 2025 exports are projected to exceed 1.2 million tonnes, while imports are expected to fall below 30,000 tonnes, underscoring the growing international competitiveness of Chinese acetic acid.

Future Expansion Pipeline

The expansion is set to continue. Statistics indicate that planned and under-construction acetic acid projects for 2026-2027 involve capacity additions of approximately 6.8 to 8.2 million tonnes. If all proceed as scheduled, China's annual acetic acid production capacity would approach 25 million tonnes.

Spotlight on New Projects

Xinjiang Zhonghe Hezhong: Its 1 million-tonne/year coal-based acetic acid project in Hami, with a total investment of RMB 5 billion, is in final equipment installation. Trial runs are expected soon. Phase I includes a 200,000-tonne acetic anhydride facility, with Phase II adding 1.2 million tonnes of methanol capacity.

Zhongrong New Energy: A new project in Xinjiang, with a total investment of RMB 2.1 billion, commenced construction in July 2025. It includes a 600,000-tonne/year acetic acid line and a 400,000-tonne/year ethanol line co-producing 800,000 tonnes of ethyl acetate.

Jiangsu Suopu: The company is advancing a project funded by a planned raise of up to RMB 1.5 billion. Phase I will include the world's largest single-unit vinyl acetate facility with an annual capacity of 330,000 tonnes.

Industrial Transformation and Demand Drivers

Amid the capacity surge, industrial transformation is accelerating. Acetic acid's applications are expanding into strategic sectors like new energy and materials. In the photovoltaic industry, vinyl acetate, a key raw material for EVA film, sees sustained demand growth from rising global PV installations. The photovoltaic sector already accounts for 56.34% of China's total EVA consumption.

Demand remains linked to traditional sectors like textiles, packaging, and pharmaceuticals. Downstream consumption is led by PTA (24% share), vinyl acetate (17%), and ethyl acetate (13%), which together account for 50% of the total.

Supportive government policies in some regions, promoting technological upgrades, energy conservation, and emissions reduction, are also contributing to stimulating acetic acid demand and industrial upgrading.