Butanol/Octanol Is in Short Supply


1 Capacity will increase rapidly

Butanol/octanol is an important organic raw material mainly
applied in sectors such as pharmaceuticals, plastics and dyeing
and printing. China's production capacity for butanol and
octanol reached 415 thousand t/a and 514 thousand t/a,
respectively, in 2006. Due to the brisk demand and the price rise
of butanol/octanol, domestic producers actively pursued
technical renovation or construction of new units along with
increasing their operating rates. It is expected that, during
the Eleventh Five-year Program period (2006-2010), China will
add 685 thousand t/a capacity of butanol/octanol, and the tight
supply of butanol/octanol will thus be eased relatively.

2 Demand increases constantly

In view of the consumption pattern of butanol, brisk demand for
butyl acrylate and butyl acetate will be the main driving force
behind the consumption increase of butanol. For example, the
main butyl acetate producers are distributed in Jiangsu province
and Shanghai and need a large quantity of butanol, so imports
of butanol to that region will still be large. The apparent
consumption for butanol in China reached 531.9 thousand tons in
2005. It is expected that the demand for butanol in China will
reach around 900 thousand tons in 2010.
    The consumption composition of octanol in China is around
78% for DOP (dioctyl phthalate), 6% for dioctyl terephalate and
16% for dioctyl adipate and acrylic esters. At present, after
the butanol/octanol unit in BASF-YPC Co., Ltd. has been put into
operation, the tight supply of octanol in the local region can
be eased to a certain extent. However, due to the rapid
development of sectors including PVC, coatings and adhesive, the
octanol output cannot meet the domestic demand, and the
dependence on imported octanol will still exist. In 2006, the
demand for octanol was around 830 thousand tons, and the supply
gap reached 290 thousand tons.

3 Imports decreased in 2005

Imports of butanol and octanol amounted to 239.9 thousand tons
and 293.7 thousand tons in 2005 - a drop of 18.3% and 3.5%
respectively from 2004. In spite of decreasing imports, China
was still a leading butanol/octanol importer.
    In 2005, Russia was the largest source of China's butanol
imports, accounting for 38.5% of the total. Japan, Germany, the
United States and Malaysia came next - 11.8%, 11.2%, 10.7% and
9.1% respectively.
    Korea was the largest octanol import source for China in 2005,
accounting for 30.6% of the total. Saudi Arabia, Japan and
Germany came next - 24.6%, 19.6% and 8.8% respectively.
   The construction of butanol/octanol projects has been
accelerated in recent years, and thus the output of
butanol/octanol has increased. However, China's capacity to
produce butanol/octanol (929 thousand t/a) cannot meet the
market demand, there is a supply deficit of butanol/octanol in
China today, and China will continue to be the leading
butanol/octanol importer in the world.

4 Price rose rapidly

Pulled by the rapid increase of downstream demand and the global
oil price rise, the market price of butanol/octanol rose rapidly.
The average price of n-butanol in the Shanghai market was RMB12
767 per ton in 2006, a rise of 34.3%. The ex-factory price of
octanol in Sinopec Qilu Petrochemical Co., Ltd. has increased
from RMB9 400 per ton in early 2006 to RMB15 400 per ton - and
reached the highest price of RMB16 600 per ton in September 2006.

5 Urgent need to form large scale production and expand
downstream applications

　　(1)Many butanol/octanol projects will be constructed in
China in the next few years. With these projects being completed,
the output of butanol/octanol will increase drastically.
However, due to the brisk demand of downstream products, the
import of butanol/octanol in China will still be large.
    (2) With the globalization of the world economy, production
units are developing towards large scale and comprehensive
energy conservation. In order to reduce the production cost and
enhance China's competitive edge, the newly constructed
butanol/octanol units should therefore be large in scale, and
the capacity of existing units needs to be expanded.
   (3) The application scope of butanol/octanol in China is
relatively narrow, and the development of butanol/octanol
downstream derivatives with high added value and technical level
is far behind development in foreign countries. Plasticizers
with special properties and high added value that are presently
needed in China are mostly imported from abroad. Domestic
butanol/octanol producers are therefore readjusting their
product portfolio, strengthening the development of
butanol/octanol downstream derivatives, and striving to develop
special plasticizers with great market potential.

Table 1 Major Butanol/Octanol Producers in China in 2006
(thousand t/a)
Producer
    Line    Butanol     Octanol     Total
Sinopec Qilu Petrochemical Co.
    #1      65          85          150
    #2       -            164         164
CNPC Jilin Petrochemical Co.
    #1      50          70          120
    #2      120         -              120
CNPC Daqing Petrochemical Co.
            25           55          80
Beijing Dongfang Petrochemical Co.
            20          50             70
BASF-YPC Co.
            135           90             225
Total        415         514         929
Source: CNCIC

Table 2  Major Butanol/Octanol Projects Being Constructed
                       in China           (thousand t/a)
Company             Capacity    Remark
Tianjin Soda Plant      225     to start production in 2007
Bohai Chemical Group    230     to start production in 2010
Hongkong Runda Group    2