China’s Market Pattern of Ethylene Industry will Change

By Guo Zhenji, Research Institute of PetroChina Jilin Petrochemical Co., Ltd

Production

As of the end of 2011, the combined capacity of China's ethylene units using the steam cracking process was 14.815 million t/a, accounting for 96.5% of the total national ethylene capacity. Of that, eight steam cracking units had a single-unit capacity of no less than 800 thousand t/a and a combined capacity accounting for 52% of the nation’s total ethylene capacity. Domestic ethylene units using steam cracking process are mainly owned by Sinopec and PetroChina. Sinopec had 14 ethylene producers (including four joint ventures- Shanghai Secco Petrochemical Co., Ltd, BASF-YPC Co., Ltd, Fujian Refining & Petrochemical Co., Ltd and Sinopec SABIC Tianjin Petrochemical Co., Ltd) with 15 production units, and its total capacity to produce ethylene reached 9.525 million t/a, accounting for 64.2% of the nation’s total. PetroChina had 6 ethylene producers with 9 production units, and its combined capacity was 3.71 million t/a, accounting for 25.1% of the nation’s total.
   According to the statistics made by the China Ethylene Industry Association, China’s output of ethylene by the steam cracking process was 15.156 million tons in 2011, up 6.8% year-on-year, and the average operating rate of ethylene units was around 100.5%. Of that, Sinopec’s output reached 10.02 million tons, a year-on-year growth of 831 thousand tons and accounting for 66.1% of the national total. Due to the overhaul of six units including PetroChina Dushanzi Petrochemical Co., Ltd, PetroChina’s output was down 147 thousand tons year-on-year to 3.468 million tons, accounting for 22.9% of the total.
   Geographically, China has three primary ethylene clusters – in the Yangtze River Delta, on the Bohai Rim and in the Pearl River Delta. Their capacity accounts for 29%, 27% and 14% of the national total, respectively. In addition, a number of large ethylene units as well as downstream matching facilities are completed, expanded or under construction in China's central and western regions such as Xinjiang region and Gansu, Sichuan and Hubei provinces in a race to keep up with the growing demand for petrochemical products for the economic development of those regions.
   With the startup of an 800 thousand t /a ethylene plant of PetroChina Fushun Petrochemical Co., Ltd and PetroChina Sichuan Petrochemical Co., Ltd's 800 thousand t/a ethylene project, China’s capacity to produce ethylene will reach 17.0 million t/a in 2012. It is expected that the capacity will exceed 20.0 million t/a by 2015. Domestic ethylene output is expected to maintain annual growth of 6% and reach around 16.1 million tons in 2012.

Demand growth drives up the imports  

In 2011 China’s apparent consumption of ethylene was 16.206 million tons, up 8.3% year-on-year and once again hitting a new high. China's ethylene self-sufficiency rate was over 90% in terms of apparent consumption. However, in terms of equivalent consumption, the self-sufficiency rate was less than 50% and there is a severe supply shortage. Polyethylene (PE) was the biggest consumption sector of ethylene, taking around 60%, and polyvinyl chloride (PVC) was next.
   Due to the rapid development of the building materials, household appliances and automobile sectors, China’s demand for PE, styrene monomer and synthetic rubbers will continue to grow rapidly, driving up the demand for ethylene. China's equivalent demand for ethylene is forecast to reach around 31.12 million tons in 2012, up 3.7% year-on-year, and it will reach 38.0 million tons by 2015. In the next few years, China’s supply of ethylene will basically meet the domestic apparent consumption, but there will still be a considerable supply shortage in terms of equivalent consumption, so China ethylene industry will still have a certain development potential.
   With the increase of domestic ethylene consumption, China’s import volume of ethylene climbed from 117.4 thousand tons in 2006 to 1.0604 million tons in 2011 and the export volume declined to 9.7 thousand tons in 2011 from 128.7 thousand tons in 2006. In 2011 China’s import value and export value of ethylene was US$1.308 billion and US$11.65 million, respectively.

Table 1 China's Ethylene Producers Using the Steam Cracking Process in 2011
Company    Capacity (kt/a)    Output (kt)
PetroChina    3 710    3 469
  PetroChina Daqing Petrochemical Co., Ltd    600    616
  PetroChina Jilin Petrochemical Co., Ltd    700+150    696+109
  PetroChina Fushun Petrochemical Co., Ltd    140    136
  PetroChina Liaoyang Petrochemical Co., Ltd    200    178
  PetroChina Lanzhou Petrochemical Co., Ltd    460+240    488+206
  PetroChina Dushanzi Petrochemical Co., Ltd    220+1 000    209+831
Sinopec    9 525    10 020.1
  Sinopec Zhenhai Refining & Chemical Co., Ltd    1 000    1 108.4
  Sinopec Yanshan Petrochemical Co., Ltd    710    753.1
  Sinopec Qilu Petrochemical Co., Ltd    800    851.7
  Sinopec Yangzi Petrochemical Co., Ltd    700    818.1
  Sinopec Shanghai Petrochemical Co., Ltd    700+145    762.2+148
  Sinopec Maoming Petrochemical Co., Ltd    1 000    1 085.2
  Sinopec Guangzhou Petrochemical Co., Ltd    210    204.1
  Sinopec Tianjin Petrochemical Co., Ltd    200    230.5
  Sinopec Zhongyuan Petrochemical Co., Ltd    180    165.3
  Sinopec Beijing Eastern Petrochemical Co., Ltd    150    143.2
  Shanghai Secco Petrochemical Co., Ltd    1 190    1 065.2
  BASF-YPC Co., Ltd    740    720.9
  Fujian Refining & Petrochemical Co., Ltd    800    852.3
  Sinopec SABIC Tianjin Petrochemical Co., Ltd    1 000    1 112.1
  Local Petrochemical Company    630    691.5
  Liaoning Huajin Chemical Industry Group    180+450    159.5+532
CNOOC    950    974.9
  CNOOC and Shell Petrochemicals Co., Ltd    950    974.9

Table 2 Major Newly Built and Expanded Ethylene Projects in China (kt/a)
Company    Existing capacity    Capacity after startup    of the new capacity    Expected startup time
PetroChina Sichuan Petrochemical Co., Ltd    -    800    2012
PetroChina Fushun Petrochemical Co., Ltd    140    800    2012
Wuhan Petrochemical Co., Ltd    -    800    2013
Sino-Kuwaiti JV    -    1 000    2016
PetroChina Daqing Petrochemical Co., Ltd    600    1 200    2012
Sinopec Shanghai Petrochemical Co., Ltd    845    1 500    2014
Sinopec Yangzi Petrochemical Co., Ltd    700    1 600    2015

China’s ethylene market will form a pattern of competition in the future

With the commercial operation of an 800 thousand t/a ethylene project of Fujian Refining & Petrochemical that was jointly built by Sinopec Corp., Exxon Mobil and Saudi Aramco in Fujian province and a 600 thousand t/a ethylene project of BASF-YPC Co., Ltd, China's ethylene market will have a new pattern with suppliers mainly consisting of four systems – Sinopec, PetroChina, JV ethylene enterprises and importers. Prior to the startup of joint venture projects, in addition to the imports, Sinopec and PetroChina are producing all of China's ethylene output, and there has been basically no commodity supply in the domestic market due to the short supply. After the startup of the joint venture projects, the market resources and supply channels have a new form, multinationals are entering China's ethylene market, and the competitive playing field has been transformed. In addition, some domestic coal to olefin enterprises, ethylene products from the Middle East and some neighboring countries will join the market competition.

The Middle East’s low cost ethylene will impact the domestic market

The negotiations on free trade zone between China and the Gulf Cooperation Council (GCC) will speed up, and an agreement is expected to be signed in the next three or four years. If that happens, the Middle East’s ethylene and downstream low-medium grade and conventional products with low cost will enter the Chinese market in great quantities after the tariff reduction. This will have an enormous influence on China's petrochemical market, and have a great impact on China’s ethylene industry and related enterprises that use a relatively high-cost naphtha as the main raw material, and mostly produce conventional and low-to-medium grade products.