SHANGHAI - German leading specialty chemicals company Lanxess AG started the construction of its largest leather chemical plant in China in Changzhou, Jiangsu province, on Monday.

Analysts have said China's rising demand for leather goods will present great market opportunities for leading domestic and multinational leather chemical manufacturers.

The $40 million facility, located in Changzhou Yangtze Riverside Industrial Park of Jiangsu province, is due to start production in the first half of 2013 with a designed capacity of 50,000 tons a year, according to Rainier van Roessel, member of the Lanxess board of management.

The new Lanxess plant, described as one of the largest of its kind in Asia, will use the latest technology and environmentally friendly processes to serve the fast-growing Chinese market.

Leather garments, furniture, handbags, and car seats have come into greater demand through China's growing taste for high-quality and luxury goods.

"This love of leather has made China into not only the world's leading producer of leather products, but also an increasingly avid consumer," said Van Roessel, adding that the groundbreaking of the new facility marks an important step forward for the growth of Lanxess' leather business.

China's leather chemical market will experience an annual growth rate of 8 percent, outpacing the global annual growth rate of 0.58 percent for the next five years, according to market research by the Shenzhen-listed specialty chemicals company Brother Enterprises Holding Co Ltd.

Lanxess' new plant will predominately serve the Chinese market, producing more than 700 leather chemical products for all stages of leather processing - from tanning to dyeing and finishing.

It will supply the automotive, furniture, garment and shoe industries, which together account for most major leather applications, said Markus Eckert, head of the Lanxess leather business unit.

"With this new plant, we will set new benchmarks for sustainability. In the leather sector, this means more efficient production, processing, recycling and reduction of emissions from end products," Eckert said.

It is estimated that by 2015, the global leather chemical demand will expand to 2.07 million tons, of which up to 793,000 tons will come from China, accounting for 38.29 percent of the global market, said Wang Xi, an industrial analyst from Industrial Securities Co Ltd.

Lanxess' leather business unit has become a driving force of the company's performance in Asia and the world. More than 40 percent of Lanxess' sales are in Asia, according to Eckert.

As the global center for leather products shifts to Asia, so does the world's leather chemical manufacturing market. However, more than 90 percent of China's high-end and green-leather chemical manufacturing is currently dominated by multinational companies.

The nation's more than 150 leather chemical companies are mainly producing low- to medium-level products with limited added value, and these companies are scattered throughout Zhejiang, Guangdong, Sichuan, Liaoning and Shandong provinces and Shanghai, according to the Brother Enterprises research report.

Lanxess is one of the largest leather chemical producers in China by market share. China has become the company's fastest-growing market and a major pillar of its global business.