Ethylene Oxide Depends on Downstream Matching   

By Zhang Yueli, the Research Institute of Industrial Economics of CNCIC   

Among industrial derivatives of ethylene, ethylene oxide (EO) is an important organic chemical product, surpassed only by polyethylene (PE) and polyvinyl chloride (PVC). EO is mainly used to produce ethylene glycol (EG). It is also one of the most important raw materials for making non-ionic surfactants. EO has a wide range of uses in industries such as dyeing, electronics, pharmaceuticals, textiles, pesticides, paper, automotive, oil extraction and refining, and it has a broad market prospect.
   Most of the world's EO plants have been matched with EG production facilities. The world's major EO manufacturers are The Dow Chemical Company, Saudi Basic Industries Corporation (SABIC), Formosa Plastics Group, Shell and BASF. In recent years, due to the rise of the Middle East petrochemical industry, the world's EO/EG production is increasingly shifting to the Middle East. SRI Consulting reports that in 2009, global EO capacity increased by 1.055 million t/a, with all growth in Saudi Arabia.
   In recent years, the world's annual EO output has constantly grown. From 2006 to 2008, it grew from 17.85 million tons to 19.01 million tons. In 2009, it was estimated to be about 20 million tons. In 2010, it is expected to reach 21.08 million tons. In recent years, typical operating rates of the world's EO plants were over 90%.
   With the slow recovery of the global economy and the gradual growth of the EO downstream demand, the world's EO capacity and output are both increasing. According to reports, in the next three years, the world's (excluding China) newly added EO capacity will reach 1.959 million t/a.
   So far, China has imported more than 10 sets of EO production installations. The patented technologies of the world's three major EO/EG patent holders have all found applications in China.
   Most of China's EO units manufacture both EO and EG. Only a small fraction of the EO is sold into the market. As of the end of 2009, China had 12 companies that make and sell EO, with a combined capacity of 673 000 t/a. All the China-related EO production and capacity data cited here include only commodity EO, not the EO that is directly made into EG. Most of China's EO manufacturers belong to China Petrochemical Corporation (Sinopec) and China National Petroleum Corporation (CNPC). In recent years, China's private enterprises have also actively entered into the EO industry.
   Currently, Sinopec Shanghai Petrochemical Co Ltd is China's largest EO producer. Its 80 000 t/a EO unit was put into operation in March 2007. At present, its total EO capacity is 136 000 t/a, 20.2% of China's total EO capacity (as of 2009). Its two units both use the SD oxidation method to produce EO. It is also capable of producing 605 000 tons of EG per year.
   Jiaxing Sanjiang Chemical Company Limited is a joint venture petrochemical company mainly funded by Hong Kong Capital International Limited. It was founded in September 2003. It uses the SD oxidation method to produce EO. Its current EO capacity is 120 000 t/a. The company is now building a 70 000 t/a EO unit that is planned to come on line at the end of 2010. When completed, the company's EO capacity will reach 190 000 t/a. At that time, the company will become China's largest EO producer.
   Sinopec Yangzi Petrochemical Company Limited has an EO capacity of 102 000 t/a and is China's third largest EO producer. Its EG capacity is 262 000 t/a. It uses the Shell technology to produce EO.
   The three companies together accounted for 53.2% of China's total EO capacity in 2009.
   On July 24th, PetroChina Liaoyang Petrochemical Company Limited completed expansion and put on stream the expanded EO facility, bringing its EO capacity to 100 000 t/a.
   Sinopec-SABIC (Tianjin) Petrochemical Co Ltd (SSTPC), a joint venture between Sinopec and SABIC, started up a 40/360 thousand t/a EO/EG plant in Tianjin in early February, which uses the Dow technology.
   Shandong Tengzhou Chenlong Energy Group's 60 000 t/a biomass EO plant was scheduled for wet commissioning in this July. It will supply feedstock for Oxiranchem (Tengzhou) Company Limited to make fine chemicals. (CCR 2010 No.12 page 25). No information on the wet commissioning was disclosed by August 6th.
   Sinopec Zhenhai Refining & Chemical Company's 100 000 t/a commercial EO facility came on line in April this year. (CCR2010 No.9) Liaoning North Chemical Industry Company Limited inaugurated production of its 100 000 t/a commercial EO unit in May. (CCR2010 No.9)
   Under atmospheric pressure conditions, EO has a low boiling point and is easily flammable and explosive, so it is not suitable for long-distance transport. Therefore, China's import and export volume of EO is less than 50 tons a year. Although EO is rarely imported or exported, its downstream fine chemical products, such as ethers of ethylene glycol, ethanolamines and non-ionic surfactants are often used for imports and exports.
   Chinese companies can produce over 300 types of EO downstream products. At present, EO is mainly used to produce EG, requiring about 70% of China's total EO output. The remaining (commodity) EO is mainly used to produce non-ionic surfactants, ethanolamines, ethers of ethylene glycol, polyether polyols and medicines.
   In recent years, China's import volume of EO downstream products has increased year by year, indicating a great potential for the development of EO. But because EO is not suitable for long-distance transport, new EO plants should be built in areas where the demand for EO downstream products is very vigorous, such as eastern China and the Bohai Rim.
   In recent years, with the rapid development of downstream industries, EO is in short supply in China. As most of the EO that is produced is consumed by the makers themselves to produce downstream products, there is very little commercial EO. This has also constantly pushed up its prices to record highs. In addition, the impact of international oil prices on the EO price is huge.
   Throughout 2009, the EO price first dropped and then rose. It dropped from RMB12 000/ton in January to RMB9 580/ton in March. Later on, it recovered slightly and then became relatively stable. Since the beginning of 2010, the EO price has continued to grow, rising from RMB10 900 /ton in the beginning of the year to RMB13 000 /ton in the end of May.
   From June, the polyester price went down, driving the EG price to drop. EO price followed to fall. Another reason for the price drop in June-July was that the expansion of PetroChina Liaoyang Petrochemical Company was completed, increasing the commercial supply.
    EO is a petrochemical product taking ethylene as raw material. The ethylene price affects the EO price significantly. When crude oil prices rise, the ethylene price also grows, pushing up the production cost of EO. The EO price will also rise.
   The price fluctuations of EO downstream products, such as EG, non-ionic surfactants, ethanolamines, ethers of ethylene glycol and polyether polyols, can also affect the EO price. Growing demand for downstream products can lead to a rise in the EO price.
   With the global economic recovery, oil prices will continue to rise, pushing up the production cost of EO. This will raise the EO price. Now that several new EG/EO units have been put into operation in China, the domestic EO supply will be increasing.
And in China, as the profit margins of