BDO Makers Hurt by Imports       

BDO (1,4-Butanediol) is an important organic and fine chemical raw material and is widely used in various industries - pharmaceuticals, chemicals, textiles, papermaking, household chemicals and auto parts. Its downstream derivatives include tetrahydrofuran (THF), polybuthylene terephthalate (PBT), gama-butyrolactone (GBL) and polyurethane (PU), coatings, plasticizers and so on.
   Currently, in the world's BDO production, the Reppe method is most widely used and reportedly accounts for more than 40% of the world's total capacity. The modified Reppe method uses acetylene and formaldehyde as major raw materials and copper/bismuth acetylide as a catalyst. It first turns acetylene and formaldehyde into 1,4-butynediol and then hydrogenates the intermediate into BDO. Another BDO synthesis route is the butadiene method, which uses butadiene, acetic acid and oxygen as raw materials. Its whole process is very long, requires a huge investment and consumes large amounts of steam. In recent years, some industrial BDO producers have begun to use n-butane or maleic anhydride as the raw material in processes such as the maleic anhydride esterification and hydrogenation method and the maleic anhydride direct hydrogenation method. The former method was developed by the UK's Davy Process Technology. In recent years, many new BDO units use this n-butane/maleic anhydride method.
   According to reports, as of the end of 2009, the world's total BDO capacity reached 1.98 million t/a.
   Since China has relatively cheap calcium carbide resources, in recent years a number of new BDO units have been constructed to use the Reppe method (the acetylene-formaldehyde method) to produce BDO. Now, 40.66% of China's BDO capacity uses the modified Reppe method, the n-butane/maleic anhydride method accounts for 24.29%, the butadiene method 12.63% and the propylene oxide method 22.42%. The market shares of the two latter methods have declined slightly.
   In recent years, China's demand for the downstream products of BDO, such as THF/PTMEC, PBT and GBL, has grown rapidly, resulting in a growing demand for BDO. With the constant development of low-cost and efficient new BDO production processes, China's BDO industry has grown rapidly. China's major BDO producers include Shanxi Sanwei Group Co Ltd, Sichuan Tianhua Co Ltd and Shandong Jiatai Petroleum & Chemical Co Ltd. In recent years, a large amount of BDO is imported from China's Taiwan region and the Middle East.
   Spurred by the short supply of BDO in China a few years ago, a number of companies have expanded their BDO capacities. In 2009, China's BDO capacity expansion reached the peak. In that year, many new BDO projects were put into production, such as Shanxi Sanwei Group Co Ltd's 75 000 t/a project (being completed and having trial production in May 2009, but not formally put into production till now), Nanjing Bluestar New Chemical Materials Co Ltd's 55 000 t/a project (CCR2009 No.17 page 19, put into production on May 17th, 2009), Shaanxi BDO Chemical Co Ltd's 30 000 t/a project (started up on April 25th, 2009), Fujian Meizhouwan Chlor-Alkali Industry Co Ltd's 30 000 t/a project (CCR 2009 No.32 page 17, put into production in November 2009), and Yunnan Yunwei Co Ltd's 25 000 t/a project (CCR2010 No.1, put into production on December 7th, 2009). In 2009, China's new BDO capacity amounted to 215 000 t/a. China's total BDO capacity in 2008 was only 209 000 t/a. So it more than doubled in 2009.
   Shanxi Sanwei Group Co Ltd is China's largest BDO producer. Its original two BDO production lines both use the Reppe process, using self-produced formaldehyde and acetylene (self-produced calcium carbide) as raw materials, so its production cost was relatively low. In addition, there are abundant cheap coal and electricity resources in the area, so this company's BDO production cost is relatively low in China. In 2008, this Group purchased Davy's n-butane/maleic anhydride process to build a 75 000 t/a BDO unit. The BDO produced by this unit is also designed to supply raw material for the company's 30 000 t/a PTMEC unit that came on stream in May 2009. But due to the impact of imported BDO, this new BDO unit has not yet started formal production.
    In recent years, China's apparent consumption of BDO has grown rapidly with the development of downstream derivatives, such as PBT resin and spandex fiber. During 2004 to 2009, China's annual BDO output increased steadily from 44 000 tons to 225 000 tons. But before 2009, because of its insufficient local BDO capacity, China had to import a large amount of BDO every year. After 2007, China's annual net import volume of BDO declined. It dropped from 105 200 tons in 2007 down to 96 000 tons in 2009.
   By the end of 2009, China's BDO capacity reached 424 000 t/a, exceeding China's actual demand for BDO. But because the new capacity does not yet run at full capacity, it is expected that in 2010, China's BDO supply and demand will basically reach equilibrium. Meanwhile, China's demand for downstream products of BDO is predicted to further increase in the next few years. Because of the overcapacity of the spandex industry, the demand for PTMEG will remain stable, and the demand for THF will remain stable, too. Therefore, the demand for BDO in the THF field will remain stable. At present, China's large GBL and PBT producers all plan to expand their capacities. The major growth points of the demand for BDO will come from GBL and PBT industries. With its excellent physical properties, PBT is rapidly widely used in energy-saving lamps and automotive plastics. The application fields of its modified materials are becoming even broader. In the future, PBT will be the fastest-growing downstream product of BDO. The price of PBS (polybutylene succinate) is close to that of disposable tableware plastics. Out of environmental considerations, the state should provide subsidies to PBS consumers. If this is done, the consumption of PBS will grow rapidly. So PBS will probably become the brightest star of downstream products of BDO. With the domestic economic recovery, the unshaken status of China's synthetic leather industry in the world will make the demand for PU slurry grow once again. BDO can be used in thermoplastic PU, hot melt adhesives and polyols industries. Now, the BDO demand from these industries is also growing.
   Due to the gradually lowering threshold of investment and technology, the rapid development of downstream derivatives of BDO and the regional distribution imbalance of China's BDO producers, many Chinese enterprises are now planning to build large-scale BDO plants, such as Shaanxi BDO Chemical Co Ltd's 70 000 t/a project (second phase; already approved but not built), Chongqing Shizong Chemical Co Ltd's 100 000 t/a project and Sichuan Tianhua Co Ltd's 60 000 t/a project. These BDO plants are all planned to be built in China's western regions. On the one hand, the abundant resources in the western regions are more favorable to the production of BDO, and on the other hand, the market demand for BDO in eastern China and southern China has approached saturation. In addition, Henan Kaixiang Chemical Co Ltd (50 000 t/a), Zhejiang Huachen Energy Co Ltd, Nanjing Bluestar New Chemical Materials Co Ltd (55 000 t/a, second phase), Chongqing Jianfeng Industrial Group (60 000 t/a BDO, CCR2009 No.27), Zibo Jiazhou Chemical Co Ltd (50 000 t/a), Chongqing Chemical and Pharmaceutical Group (140 000 t/a), Sinopec Sichuan Vinylon Plant (Chongqing, 200 000 t/a) , Korea's Hyosung (Chongqing, 100 000 t/a) and Sinopec Yizheng Chemical Fiber Co Ltd (50 000 t/a BDO, CCR2009 No.31) are also accelerating the construction of their BDO projects.
   If these