China's Lunan Chemical Launches 300,000-Ton Caprolactam Project, Marking Major Expansion in Green Coal-to-Chemicals Sector

Recently, Yankuang Lunan Chemical Co., Ltd., a subsidiary of Shandong Energy Group, successfully passed the preliminary completion inspection for its 300,000-ton-per-year caprolactam project, conducted by an expert panel from Yankuang Energy. This milestone signals the imminent commissioning of one of China's key chemical industry projects. The initiative forms a strategic part of Shandong's high-end chemical industry development plan and is recognized as a model project for the extension of China's coal-to-chemicals value chain.

Lunan Chemical, wholly owned by Shandong Energy Group, specializes in acetic acid, polyoxymethylene (POM), and caprolactam, with a total production capacity of 3.37 million tons. Its vertically integrated operations link upstream and downstream processes, supporting complete product chains such as ammonia–caprolactam–nylon 6 chips; methanol–formaldehyde–POM; and acetic acid–acetic anhydride–acetate esters–cellulose acetate. With an annual capacity of 1.2 million tons, the company is a leading player in China's acetic acid industry.

The new caprolactam project adopts the Ammonium Oxime Process (also known as the TSO process), which is currently considered a state-of-the-art, environmentally friendly technology in China. Its feedstock comes from a hybrid route combining coal and petrochemicals. A portion of the cyclohexanone used as raw material is derived from coal-based syngas-first gasified into methanol and then converted into cyclohexanone-thereby reducing dependence on petroleum-based benzene.

Caprolactam is a key organic chemical used primarily as a precursor in the nylon industry. In its liquid form, it is transparent with a minty and acetone-like odor. The main application of caprolactam is the polymerization into polyamide chips, commonly known as nylon-6 or PA6 chips, which are further processed into nylon fibers, engineering plastics, and plastic films. Depending on their specifications and quality levels, nylon-6 chips are used across a variety of application areas.

In recent years, China's caprolactam industry has grown rapidly, with capacity expansion driven by rising demand-particularly from the nylon-6 sector. However, the industry also faces mounting challenges including supply-demand imbalance, rising production costs, and stricter environmental regulations. As of 2025, China's total caprolactam production capacity is estimated at 8.94 million tons, with a compound annual growth rate of 13.22%. Leading domestic players such as Hengyi Petrochemical, Fujian Shen Yuan, Baling Petrochemical, and Luxi Chemical account for roughly 50% of national capacity.

Caprolactam is primarily consumed in the production of nylon-6, with smaller volumes used in specialty fibers and films. In 2024, PA6 consumption in China grew by 24%, but the industry now faces a growing risk of overcapacity. Influenced by fluctuations in crude oil and benzene prices, caprolactam market prices declined steadily into February 2025. According to BuyChem Plastics Research Institute, the spot price in East China stood at RMB 9,075/ton-down 12.7% from the beginning of the year. Due to environmental pressures, producers using the traditional HPO process are increasingly required to upgrade or transition to cleaner technologies, with the Ammonium Oxime Process now supported by favorable policy.

While the industry remains in a phase of capacity expansion and is moving toward greener and more efficient technologies, the risk of overcapacity persists. Going forward, key development priorities will include industrial chain integration, export market expansion, and a transition to low-carbon operations.