Pressure on China's Aniline Market Increases Sharply   

Both production and sales were brisk in 2010

Because of the continual prosperity of China's MDI (diphenylmethane diisocyanate) and rubber auxiliary markets and the recovery growth of exports in dyestuffs/pigments, medicines and pesticides, the demand for aniline grew apparently in 2010. Owing to the inadequate supply of raw materials especially hydrogen and natural gas, some small and medium aniline units were in suspended production or at low operating rate, the domestic supply of aniline decreased and the net imports of aniline increased. The price of aniline fluctuated at a relatively high level of around RMB11 000 per ton. Major domestic aniline producers maintained a relatively high operating rate and increased their economic returns. Table 1 shows China's producers of aniline in 2010.
    China produced around 870 000 tons of aniline in 2010, a year-on-year increase of around 8%. Because of the brisk demand for MDI and rubber auxiliaries, in some local regions aniline was in short supply in 2010, especially in the second half of 2010. The apparent consumption of aniline reached around 930 000 tons in 2010, a rise of 10.7% over 2009.

Rapid expansion of capacity

Due to bright market prospect of aniline, domestic aniline enterprises with considerable scale have accelerated the expansion of capacity. China's newly added capacity of aniline in 2010 reached 450 000 t/a - 90 000 t/a aniline expansion project of Sinopec Nanjing Chemical Industry Co Ltd and 360 000 t/a aniline unit in Yantai Wanhua Polyurethanes Co Ltd. The production capacity of aniline in China has therefore reached 2.065 million t/a. In the next few years, a large number of aniline projects will be constructed or planned for construction in China. It is expected that China's newly added capacity of aniline will be 1.48 million t/a in 2014. In addition, there are still many MDI projects being planned for construction in China, and these projects basically have their own matching large-scale aniline unit. China still has 15 aniline companies with production capacity of below 50 000 t/a (including 50 000 t/a). If there are no suitable matching downstream product units, these small and medium aniline plants will likely be eliminated due to the fierceness of competition in the coming years.

Demand growth to be slower than production growth

With the newly construction of MDI and rubber auxiliary projects, MDI and rubber auxiliaries have gradually tended to be the main driver for the growth of aniline consumption. The pull of the aniline consumption from traditional consumption sectors is limited.
   Traditional consumption sectors: with the global economic recovery, both demand and export amount of dyestuffs/pigments, medicines and pesticides as well as intermediates will grow stably. It is expected that the demand for aniline from traditional consumption sectors will grow 5% in 2010 and the newly added demand for aniline will be around 20 000 tons.
   MDI: Yantai Wanhua Polyurethanes Co Ltd started its second phase 300 000 t/a MDI project in Ningbo, Zhejiang province in early 2011. The MDI project consumes around 240 000 tons of aniline a year and has its own matching aniline unit. (CCR 2011 No.1)  Many companies in China are constructing or plan to construct large-scale MDI projects. These projects mainly include the MDI project of Bluestar New Chemical Materials Co Ltd in Tianjin municipality, BASF's 400 000 t/a MDI project in Chongqing municipality (Page 12, this issue and CCR 2010 No.8), the MDI expansion project of Bayer MaterialScience in Shanghai, the MDI project in Gansu Yinguang Chemical Industry Group Co Ltd, 600 000 t/a MDI relocated project in Yantai Wanhua Polyurethanes Co Ltd and the MDI project in Cangzhou Dahua Co Ltd. If these projects are completed on schedule, the capacity of MDI in China is expected to increase by 3.3 million t/a in 2015, consuming around 2.6 million tons of aniline a year. Most MDI projects mentioned above have their own matching aniline projects and will not need to purchase commodity aniline.
   Rubber auxiliaries: the newly added capacity of rubber auxiliaries reached around 90 000 t/a during 2010-early 2011. Many rubber auxiliaries units being constructed in 2011 include the second phase 50 000 t/a p-aminodiphenylamine and 40 000 t/a antioxidant 4020 projects in Carlyle Sinorgchem Shandong Co Ltd, the 15 000 t/a p-aminodiphenylamine and 30 000 t/a rubber accelerator M projects in Shan county of Shandong province, the 30 000 t/a rubber accelerator project of Jiangsu Sopo Corporation (Group) Ltd in Lianyungang of Jiangsu province, the 10 000 t/a antioxidant 4020 and intermediates projects in Dongying Xishui Rubber Co Ltd and the second phase 30 000 t/a rubber accelerator relocated project in Tianjin No. 1 Organic Chemical Plant. It is expected that China’s newly added capacity of rubber auxiliaries will be around 160 000 t/a in 2012.  Based on the calculation of aniline consumption in the domestic new rubber auxiliary projects, the demand for aniline is expected to increase by around 55 000 tons in 2011. If the projects mentioned above are completed on schedule, the demand for aniline will grow around 70 000 tons in 2012.
   China's demand for aniline has increased rapidly, however, most MDI units have their own matching aniline units and basically do not need to purchase commodity aniline and the newly added capacity of aniline is much bigger than the demand growth, the market competition of commodity aniline will therefore be fiercer in China and the profit margin of domestic aniline producers will be narrowed greatly. In 2011, the domestic newly added supply of commodity aniline will mainly from Sinopec Nanjing Chemical Industry Company and the second phase MDI project in Ningbo branch of Yantai Wanhua Polyurethanes Co Ltd and is expected to reach around 210 000 tons. The demand for aniline in the sectors including dyestuff/pigment, medicine, rubber auxiliary and pesticide as well as intermediate will only increase by 75 000 tons, plus net imports of around 20 000 tons, the supply growth of aniline from the sectors mentioned above will reach around 95 000 tons. With the startup of large-scale aniline units in Shanxi Tianji Coal Chemical Group Co Ltd and Jilin Connell Chemical Industry Co Ltd, if no downstream MDI units match with aniline units mentioned above, China's market competition of commodity aniline will be fiercer and will have great impacts on domestic small enterprises.

Table 1 China's Producers of Aniline in 2010
Producer    Capacity (thousand t/a)                                                                     
Ningbo branch of Yantai Wanhua Polyurethanes Co Ltd    360
Bayer MaterialScience (Shanghai) Co Ltd    280
Sinopec Nanjing Chemical Industry Company    260
Shanghai Lianheng Isocyanate Co Ltd    160
Jilin Connell Chemical Industry Co Ltd    150
Shanxi Tianji Coal Chemical Group Co Ltd    135
SP Chemicals (Taixing) Co Ltd    135
PetroChina Lanzhou Petrochemical Co Ltd    70
Shandong Jinling Chemical Co Ltd    60
Zhangqiu Riyue Chemical Co Ltd    50
Shandong Haihua Co Ltd    50