The consumption of paracetamol, which takes the most important position among NSAIDs, has kept growing worldwide, which promotes the production of PAP, the key raw material of paracetamol. As one of main paracetamol manufacturers in the world, China's paracetamol export has constituted 30%-40% of the total paracetamol consumed in the world. On the other hand, process of PAP and paracetamol in China is improving, largely attributable to the governmental environmental protection policy. However, China’s PAP manufacturers’ profit has been further squeezed by the growing investment in environmental protection and the global economic depression in 2008. To further penetrate into the industry, especially the production process, CCM has produced a report of Benchmarking on PAP and Paracetamol Production in China, which will provide you with the answers to the following questions:  What are the developing status and trends of the production processes of PAP and paracetamol in China?  What are the production costs of these process by theoretical model?  What are the actual production cost and total profit of benchmark enterprises of PAP and paracetamol in this report in China?  How are the total profit comparison between benchmark enterprises of PAP and paracetamol? What are the financial analysis of benchmark enterprises in 2007?  What are the prospective technologies of PAP production in China till 2015?

1. CCM Data & Primary Intelligence
Benchmarking on PAP and Paracetamol Production
in China
- The second edition
Researched & Prepared by:
Guangzhou CCM Information Science and Technology Co., Ltd
Guangzhou, P. R. China
Nov. 2008
Copyright by Guangzhou CCM Information Science and Technology Co., Ltd (P. R. China)
Any publication, distribution or copying of the content in this report is prohibited.
Website: http://www.cnchemicals.com
Tel: +86-20-3761 6606
Fax: +86-20-3761 6968
Email: econtact@cnchemicals.com
Website: http://www.cnchemicals.com Email: econtact@cnchemicals.com
Tel: +86-20-3761 6606 Fax: +86-20-3761 6968

2. CCM Data & Primary Intelligence
Description:
The consumption of paracetamol, which takes the most important position among NSAIDs, has kept
growing worldwide, which promotes the production of PAP, the key raw material of paracetamol.
As one of main paracetamol manufacturers in the world, China's paracetamol export has constituted
30%-40% of the total paracetamol consumed in the world. On the other hand, process of PAP and
paracetamol in China is improving, largely attributable to the governmental environmental protection
policy.
However, China’s PAP manufacturers’ profit has been further squeezed by the growing investment in
environmental protection and the global economic depression in 2008.
To further penetrate into the industry, especially the production process, CCM has produced a report of
Benchmarking on PAP and Paracetamol Production in China, which will provide you with the answers
to the following questions:
What are the developing status and trends of the production processes of PAP and paracetamol in
China?
What are the production costs of these process by theoretical model?
What are the actual production cost and total profit of benchmark enterprises of PAP and paracetamol
in this report in China?
How are the total profit comparison between benchmark enterprises of PAP and paracetamol?
What are the financial analysis of benchmark enterprises in 2007?
What are the prospective technologies of PAP production in China till 2015?
Main content:
No. Content Page
Executive Summary 4
Introduction and methodologies 8
I Review of PAP & paracetamol industry 10
I-1 Brief introduction to paracetamol industry in China 10
I-2 Brief introduction to PAP industry in China 13
II Brief introduction to various technologies of PAP and paracetamol 16
II-1 Introduction to processes for PAP production 16
II-1.1 Industralized technologies of PAP in China 17
Website: http://www.cnchemicals.com Email: econtact@cnchemicals.com
Tel: +86-20-3761 6606 Fax: +86-20-3761 6968

3. CCM Data & Primary Intelligence
- Iron reduction of p-nitrophenol 17
- Catalytic hydrogenation of p-nitrophenol 18
- Catalytic hydrogenation of nitrobenzene 20
II-1.2 Technologies under research 21
- Electrolytic reduction of nitrobenzene 21
- Other findings 25
II-1.3 Comparison among the above four technologies 26
II-2 Introduction to processes for paracetamol production 27
II-2.1 One-step method 27
II-2.2 Two-step method 28
III Detailed introduction to most popular methods of PAP and paracetamol 30
III-1 Technology for PAP 30
III-1.1 Description of production process and theoretical model of raw materials by iron 30
III-1.2 Description of production process and theoretical model of raw materials by 33
III-2 Technology for paracetamol 37
III-2.1 Brief description of production process 37
III-2.2 Flow chart of paracetamol production 38
III-2.3 Theoretical model of raw materials 38
IV Estimation on cost and profit of PAP and paracetamol 40
IV-1 In PAP enterprises 40
IV-1.1 Jiangsu Zhongming (adopting PNCB technology) 40
- Basic situation in Jiangsu Zhongming 40
- Financial analysis of Jiangsu Zhongming in 2007 42
- Estimation on raw material cost 47
- Estimation on manufacturing cost 47
- Estimation on management cost 49
- Estimation on total production cost 49
- Estimation on profit 50
IV-1.2 Liaoning Tianbao (adopting PNCB technology) 52
- Basic situation in Liaoning Tianbao 52
- Financial analysis of Liaoning Tianbao in 2007 55
- Estimation on raw material cost 60
- Estimation on manufacturing cost 60
- Estimation on management cost 61
- Estimation on profit 61
IV-1.3 Liaoning Jinhua(adopting NB technology) 62
- Basic situation in Huludao Jinhu 62
- Estimation on raw material cost 63
- Estimation on manufacturing cost 64
- Estimation on management cost 64
Website: http://www.cnchemicals.com Email: econtact@cnchemicals.com
Tel: +86-20-3761 6606 Fax: +86-20-3761 6968

4. CCM Data & Primary Intelligence
- Estimation on profit 65
IV-1.4 Comparison among above three manufacturers 66
IV-2 In paracetamol enterprises 69
IV-2.1 Hebei Jiheng 69
- Basic situation in Hebei Jiheng 69
- Actual flowchart in Hebei Jiheng 70
- Financial analysis of Hebei Jiheng in 2007 72
- Estimation on raw material cost 77
- Estimation on manufacturing cost 78
- Estimation on management cost 79
- Estimation on total production cost 80
- Estimation on profit 80
IV-2.2 Lu'an Pharm 82
- Basic situation in Lu'an Pharm 82
- Financial analysis of Lu'an Pharm in 2007 83
- Estimation on raw material cost 83
- Estimation on manufacturing cost 89
- Estimation on management cost 89
- Estimation on total production cost 90
- Estimation on profit 91
IV-2.3 Comparison between Hebei Jiheng and Lu'an Pharm in profit 93
V Forecast on PAP & paracetamol industry in China 95
V-1 Forecast on market 95
V-2 Forecast on technology 95
V-3 Competitive power of Chinese paracetamol 97
VI Site visit reports 101
Executive summary:
(Note: The following summary is based on the situation in 2008 and maybe different to what it is
nowadays. Please be noted.)
- Technologies of Chinese enterprises
In the past decade, China’s paracetamol and PAP industry has boomed quickly, and both of their
output grows with CAGR of more than xx%. Chinese manufacturers mainly adopt iron reduction
method and catalytic hydrogenation of p-nitrophenol to produce PAP, among which iron reduction
method accounts for xx% of the total capacity currently.
XXX Co., Ltd. is the largest PAP producer in China, with PAP capacity of xxxxt/a in 2008. XXX Co., Ltd.
is the only Chinese PAP producer that adopts catalytic hydrogenation of p-nitrophenol, and its capacity
Website: http://www.cnchemicals.com Email: econtact@cnchemicals.com
Tel: +86-20-3761 6606 Fax: +86-20-3761 6968

5. CCM Data & Primary Intelligence
of PAP is xxxxt/a in 2008.
Though overseas PAP manufacturers mostly adopt more advanced technologies including catalytic
hydrogenation of nitrobenzene and electrolytic reduction of nitrobenzene, these technologies are still
under research now in China.
- Cost and profit of Chinese enterprises
Production cost of PAP of Chinese enterprises ranges from USDxxxx/t to USDxxxx/t in November 2008.
It is noted that cost of raw materials constitutes more than XX% of the total production cost. It even
approaches xx% in XXX Chemical Plant and xx% in XXX Co., Ltd., two companies CCM has visited
and investigated.
CCM estimates that the profit level of Chinese PAP manufacturers is actually very low. Profit of PAP in
XXX reaches USDxxxx/t, which it is only USDxxxx/t in XXX in November 2008. During the
corresponding period, their quoted price of PAP is USDxxxx/t and USDxxxx/t respectively, whereas,
Chinese paracetamol producers disclosed that they were often able to purchase domestic PAP at a
price of about USDxxxx/t.
Paracetamol production is mature in China and the production cost among different manufacturers is
nearly the same. To those armed with complete equipment such as XXX, though they have heavy
burden on paying for interest and amortization and the production cost is high, they can gain more profit
for higher price and larger production scale.
- Forecast on PAP and paracetamol production
Motivated by demands from both domestic and international markets, Chinese paracetamol will keep
on developing relatively rapidly in the coming several years. It is estimated by CCM that the annual
growth rate of paracetamol output will amount to nearly xx% in the coming five years.
Character of CCM' Report:
The aim of this report is to provide powerful assistance to the strategy group and the management
team in making correct decision as how to penetrate the ever-increasing China market and how to
catch the maximum commercial opportunities. The report is formulated independently by CCM’s
professional market researchers, based on the first-hand and primary data which are analyzed by
scientific methodology, confirmed with both manufacturers/end users/traders and legal authorities, and
presented in a logic way.
Sample pages：
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Tel: +86-20-3761 6606 Fax: +86-20-3761 6968

6. II-1 Introduction to processes for PAP production
PAP was prepared firstly by Bayer and Caro in 1874, with p-nitrosophenol as the raw material,
by reducing p-nitrosophenol in acid agent (HCl) with tin as the reducer.
Table II-1-1 Major PAP production technologies in China, 2008
Starting
Technology Advantage Disadvantage Status in China,2008
material
High product cost,
Iron reduction Lower investment, mature serious pollution, Mainstream production
method technology small-scale technology in China.
production
p-nitrophenol Only Anhui Bengbu Bayi
Catalytic High product cost,
Good product quality, Chemical Industry Co., Ltd
hydrogenation catalyst tends to
high yield, little pollution adopts this process, with capacity
method lose activity.
20,000t/a in 2008
Low product cost, good
Electrolytic High energy
quality of production, high No application.
reduction method consumption
yield, little pollution
Only Liaoning Huludao Jinhua
Catalytic
High yield, high quality, Fine Chemical Co., Ltd. once
hydrogenation High cost in catalyst
little pollutant adopted this process, but it has
method (NB)
nitrobenzene stopped it since 2004.
No application, but being under
Low product cost, little
Electrolytic High energy study by universities like Peking
pollutant, short production
reduction method consumption University and Hebei University
process
of Technology
Table II-1-3 Production situation of Chinese PAP producers, Nov- 2008
Iron reduction Catalytic Catalytic Electrolytic reduction
of hydrogenation of hydrogenation of of nitrobenzene
p-nitrophenol p-nitrophenol nitrobenzene
Number of users 9 1 0 0
(Bengbu Bayi) (Liaoning Jinhua (Dongzhitaong
has stopped this Pharmaceutical(Anhui)
process since Co., Ltd. is inviting
2004.) investment)
Current capacity(t/a) 107,700 20,000 0 0
Output in 2007(t) 76,000 15,000 0 0

7. Table II-1.3 -1 Comparison among different technologies, Oct- 2008
Investment
calculated
Production Government’s
Technology by 10,000t/a, Characteristic
cost (USD/t) attitude
thousand
toward it
USD
Iron reduction 2,482~ 3,210 Limit Higher material consumption, high
method 2,628 pollution, high iron content, easy operation,
low cost
Catalytic 2,628 Encourage Low pollution, low iron content, high cost
hydrogenation of ~2,774 9,780 in catalyst
p-nitrophenol
Catalytic 3,212 21,900 Encourage Low pollution, high quality of product, hard
hydrogenation of ~3,504 to operate, high cost in catalyst
nitrobenzene
Electrolytic 2,336 Encourage Low pollution, high quality of product, high
reduction of ~2,628 3,650 cost in electricity, hard to operate
nitrobenzene
II-2.3 Technology under research in China
For one step method, there are two ways of producing paracetamol under research in China
now. One is started from nitrobenzene as “a” pathway and the other is started from phenol as
“c” pathway described in chapter II-2.1.
Table II-2.3-1 Key researchers on one-step technology of paracetamol production in China
Status of the
Researcher Institute or University Study Topic Achievement
research
Total yield is around 55%.
The process of catalytic
Boron trifluoride ether
hydrogenation of
solution is adopted instead of
nitrobenzene, which is
sulfuric acid as medium for
Hebei University of similar to the two-step
hydrogenation. Then No industrial
Yanji Wang Technology method mentioned
ammonia isn’t involved in application.
previously, but it doesn’t
acetylation, and thus the
purify PAP, the
waste water can be reduced.
intermediate of
The researcher got patent
paracetamol.
CN1569819 in 2005.

8. The production of
paracetamol after The yield is improved to 60%
acetylation, oximation by adopting To adopt efficient
Xingquan Xi’an Modern Chemistry
and rearrangement catalyst and control pH of Terminated
Chen Research Institute
reaction based on oximation.
phenol.
III-1.1 Description of production process and theoretical mode of raw materials by iron
reduction technology
Table III-1.1-1 Theoretical consumption of raw material of PAP in China, Oct- 2008
Oct-2008 May-2006
Raw materials Unit consumption Price, Unit cost, Price, Unit cost,
(kg/kg) USD/kg USD/kg USD/kg USD/kg
*
p-Nitrochlorobenzene 1.60 0.88 1.41 0.69 1.10
**
Caustic soda (30%) 3.00 0.10 0.31 0.06 0.19
Iron powder (technical ) 1.50 0.55 0.83 0.31 0.47
Hydrochloric acid
(30%,technical) 0.30 0.06 0.02 0.08 0.02
Magnesium oxide 0.01 0.12 0.00 1.25 0.01
Sodium metabisulfite 0.02 0.31 0.01 0.25 0.01
Total 2.58 1.80
IV-1.1 Jiangsu Zhongming Pharm-Chemical Co., Ltd.
Table IV-1.1-1 Main equipment in Jiangsu Zhongming
Name of equipment Number Unit capacity (Liter) Total capacity (Liter)
Hydrolization reactor 6 10,000 60,000
Acidification reactor 6 10,000 60,000
Reduction reactor 9 10,000 90,000
Crystallization reactor 36 10,000 360,000

9. Table IV-1.1-2 General situation of Jiangsu Zhongming, Nov-2008
Technology improvement Employees Waste treatment Distribution Maintenance Transportation Debt Management Raw
cost equipment materials
supplier
-Jiangsu Zhongming plans to -300 employees in -It has invested -It sells PAP mainly to Lu’an -At least -Mainly transports its -Little loan -Very simple, - Jiangsu
invest about USD0.73 million total, among who 20 USD0.44 million in Pharm, Hebei Jiheng etc USD0.15 products through from bank. only a Yangnong
to upgrade its production lines, are technicians. waste treatment –It owns self-support import & million per highway and the telephone in Chemical
and it is going to adopt -Average salaries of - it firstly disposes waste export right year freight to Shanghai office Group
technology of sulphur ordinary operators water by itself , and port is USD29.20 per
hydrogenation to produce and administrators are then sends them to tonne of PAP
PAP. USD146/month and special waste water
-It has finished the trial USD292/month, treatment plant nearby
production which adopts the respectively.
technology mentioned above,
and will possibly launch
production in March 2009.

10. Table IV-1.1-4 Income statement of Jiangsu Zhongming in 2007
31-Dec-07 31-Dec-06
ITEM
Unit: thousand USD Unit: thousand USD
Sales 11,512.53 10,615.47
Less: Cost of sales 9,597.11 8,889.72
Interest expenses 190.29 159.15
Taxes and associate charges 0.00 175.44
Selling and distribution expenses 258.53 90.23
Administrative expenses 122.05 181.70
Financial expenses 23.03 0.18
Impairment loss 0.00 0.00
Add: Gain(loss) from investment 0.00 0.00
Operating profit / ( loss) 1,321.52 1,119.05
Add: Non－operating income 14.44 18.80
Less: Non－operating expenses 1,402.89 36.35
Total profit / (loss) -66.93 1,101.50
Less :Profit taxes 0.00 73.93
Net profit / (loss) -66.93 1,027.57
Source: CCM International Ltd.
Table IV-1.1-12 Estimation on profit of Jiangsu Zhongming, Oct-2008
Item PAP, USD / kg Remark
1. Total income 3.13 Price + Return of VAT + Income for selling wastes
Price 3.07 FOB Shanghai in Oct-2008
Return of VAT 0.00 This is not an export price, so no return of VAT.
Other income after tax 0.06 From selling iron mud to steel factory
Total production costs + VAT+ EAT & CT
2. Expense 2.90
+ House tax+ Land holding tax + Others tax
Total production costs 2.80
VAT 0.08
EAT & CT 0.008
House tax 0.0003
Land holding tax 0.003 Land area x Land holding tax
Others tax (Pollutant discharge fee, stamp tax
0.01
and tax on vehicles and vessels use)
3. Gross Profit 0.23 Income - Expense
4. Profit tax 0.06 Gross profit×25％
5. Profit after tax 0.17 Gross Profit - Profits Tax