China to Accelerate PX Capacity Expansion

By Hu Shiming, Research Institute of Industrial Economics of CNCIC

PX (paraxylene) is an important organic chemical raw material mainly used to produce PTA (purified terephthalic acid) and DMT (dimethyl terephthalate). PTA and DMT are mainly used to synthesize polyethylene terephthalate (PET)-polyester and, in turn, to produce polyester fibers and tire cord fabrics. PET is also used to make polyester bottles, polyester films, plastic alloys and other industrial components. In addition, a small amount of PX is used for the production of [2.2] paracyclophan (for producing electrical substrate coatings) as well as products in small quantities like vitamins, medicament and insecticides.
   PX is mainly manufactured by the adsorption and separation of mixed xylene that is produced through the fractionation of reforming oil and hydrogenated pyrolysis gasoline as well as through the disproportionation of toluene. At present, the companies that have a full set of PX patent production technologies include Honeywell’s UOP of the United States, IFP’s Axens of France and China National Petroleum Company (CNPC).

1. Capacity expansion has become difficult

The rapid development of China's polyester industry has promoted constant expansion of production scale for PTA and PX. China’s capacity to make PX increased from 1.656 million t/a in 2000 to 3.634 million t/a in 2008 with an average annual growth of 10.3%. With the startup of many new PX units in 2009, the domestic capacity to produce PX expanded drastically to 7.074 million t/a, being nearly double that of 2008. In 2010, only PetroChina's Urumqi Petrochemical Co., Ltd's 1.0 million t/a PX unit was put into operation, and China’s capacity to make PX reached 8.074 million t/a, being nearly four times larger than 1.676 million t/a of 2002. Due to a slowdown of new PX construction projects, no new PX units came into service from January 2011 to October 2012. Fujian Dragon Aromatics (Zhangzhou) Co., Ltd, a joint venture being relocated from Xiamen to Zhangzhou, started the construction of its PX unit, which is included in the nation's 11th Five-Year Program for PX, in May 2009, and originally planned to start up the PX unit in the middle of 2012. Construction was started on PetroChina’s 650 thousand t/a PX project in Pengzhou of Sichuan province in 2009, and PetroChina conducted an intermediate hand-over of the project in 2011 and planned to start it up in 2012.
   At present, China has 13 PX producers, which are mainly distributed in the three state-owned oil giants – Sinopec, PetroChina and CNOOC – and the combined PX capacity in the three giants accounts for 82.5% of the national total. In addition, China has one privately owned PX producer – Dalian Fujia Dahua Petrochemical Co., Ltd, a 51: 49 joint venture between Dalian Fujia Group and Dalian Dahua Group – and one enterprise with a foreign background – Qingdao Lidong Chemical Co., Ltd, which is a 60: 30: 10 joint venture of Singapore GS Aromatics, Oman Oil Company and China's Hongxing Organic Chemical Co., Ltd. China has 17 sets of PX production equipment. Most PX producers have adopted the technology from UOP, and their capacity to make PX totals 6.085 million t/a, accounting for around 75% of the national total. The exceptions are Sinopec Zhenhai Refining & Chemical Co., Ltd, CNOOC Huizhou Refinery Company and Dalian Fujia Dahua Petrochemical Co., Ltd with a combined capacity of 2.09 million t/a using the adsorption separation Technology from Axens.  Major PX producers in China in 2012 are listed in Table 1.
   
Table 1 China’s major PX producers in 2012
Producer    Capacity (thousand t/a)    Patent technology    Sets of units    Startup time

Sinopec    4 068        11    
Shanghai Petrochemical Co Ltd????    835    UOP    2    1985/2009
Yangzi Petrochemical Co Ltd????    800    UOP    2    1989/2005
Fujian Refining & Chemical Co Ltd???    700    UOP    1    2009
Jinling Petrochemical Co Ltd????    600    UOP    1    2009
Zhenhai Refining & Chemical Co Ltd????    520    Axens    1    2003
Qilu Petrochemical Co Ltd????    64    UOP    1     1995
Tianjin Petrochemical Co Ltd????    334    UOP    2    1980/2000
Luoyang Petrochemical Co Ltd????    215    UOP    1    2000

PetroChina    1 700        3    
Urumqi Petrochemical Co Ltd    1 000    UOP    1    2010
Liaoyang Petrochemical Co Ltd    700    UOP     2    1996/2005

CNOOC    840        1    
CNOOC Huizhou Refinery Company    840    Axens    1    2009

Others    1 400        2    
Dalian Fujia Dahua Petrochemical Co Ltd    700    Axens    1    2009
Qingdao Lidong Chemical Co Ltd    700    UOP    1    2007

Total    8 008        17    


2. High profit margin of PX

With the constant growth of capacity, China’s output of PX has also increased continually. The domestic output of PX was only 1.3 million tons in 2000, and reached 2.24 million tons and 3.74 million tons, respectively in 2005 and 2007. Affected by the global financial crisis, China’s PX output dropped slightly in 2008. Due to the drastic capacity expansion of PX, the domestic output of PX increased drastically to 4.8 million tons and 6.62 million tons, respectively in 2009 and 2010. In 2011, China’s PX output reached 7.26 million tons, up around 10% year-on-year.
   As the deep-processing matching project of the refineries, the PX projects have a higher profit margin. The direct raw material for the production of PX is isomeric mixed xylene, and mixed xylene is produced from naphtha. The global capacity to make PX has increased significantly in recent years; however, due to the growth of demand for PX in China and the Middle East, and a serious shortage of cotton around the world, the price of PX has remained at a high level and PX producers have reaped handsome profits. The profit of PX producers began to be narrowed in September 2009, and after bottoming out in October 2010, it began to rebound quickly and became positive again in December 2010. No large-scale PX units has been put into operation since 2011, the domestic demand for PX is brisk, and the PX supply is tight, so the PX price has rebounded and the profitability of PX producers has been restored.

3. High enthusiasm for constructing PX projects

Due to the serious shortage of both capacity and output, many companies in China are expanding or constructing PX units to meet the domestic demand. At present, the PX projects under construction include Fujian Dragon Aromatics (Zhangzhou) Co., Ltd’s 800 thousand t/a unit, PetroChina’s 650 thousand t/a project in Pengzhou of Sichuan province, Sinopec Hainan Refining & Chemical Co., Ltd’s 600 thousand t/a unit, Dalian Fujia Dahua Petrochemical Co., Ltd’s 700 thousand t/a expansion project and Sinopec Shanghai Petrochemical Co., Ltd’s expansion project (from 235 thousand t/a to 330 thousand t/a). It is expected that the PX projects mentioned above will be put into production in 2013.
   The PX projects that are currently in the design phase or early stages of work include Sinopec Luoyang Petrochemical Co., Ltd’s 450 thousand t/a expansion project, Sinopec Yangzi Petrochemical Co., Ltd’s 400 thousand t/a expansion project, Sinopec Maoming Petrochemical Co., Ltd’s 600 thousand t/a unit, Fujian Dragon Aromatics (Zhangzhou) Co., Ltd’s 800 thousand t/a expansion project, Liaoning Huajin Chemical (Group) Co., Ltd’s 1.4 million t/a unit as well as PetroChina Guangxi Petrochemical Co., Ltd’s 1.0 million t/a unit.
   In 2012, because no new PX units were put into operation, it is expected that the operating rate of PX units in China will have a year-on-year growth of 3%, and output will reach around 7.5 million tons, up 3.3% year-on-year. In the next few years, the examination and approval of new PX projects will be increasingly strict. According to the comprehensive analysis of the PX projects being constructed or planned for construction, it is roughly estimated that by the end of 2016, China’s total capacity to make PX will reach 13.5 million t/a, output will be around 12.2 million tons and the operating rate will reach around 90.4%.

4. Driven by the rapid expansion of PTA production scale, the demand for PX increases drastically

PX in China is almost all used for the production of PTA. During 1997-2001, China’s capacity to make PTA increased slowly from 1.6 million t/a to 2.255 million t/a with an average annual growth of 9.0%. In recent years, with the rapid development of polyester industry, the production scale of PTA has expanded rapidly driven by the brisk demand for PTA. China’s capacity to produce PTA was around 8.7 million t/a, in 2006 after an average annual growth of 30% during 2001-2006. As of the end of 2011, China had 20 PTA producers with a total capacity of 19.4 million t/a, after annual growth of 17% during 2006-2011.
   Over the years, due to upstream constraints of producing raw material PX, China’s PTA output cannot meet the demand of the polyester industry, and China has to import great quantities from abroad each year. With the constant expansion of PTA capacity, the domestic supply of PTA has increased and the self-sufficiency rate of PTA increased from 36% in 2002 to 73% in 2011. It is expected that China’s PTA self-sufficiency rate will increase year-on-year.
   As the raw material of PTA, the demand for PX is greatly influenced by the PTA demand. Before 2002, China restricted investments in PTA capacity, so the domestic demand for PX increased steadily, most PX used by China was supplied domestically, and only a little was imported from abroad. In the “Catalogue for the Guidance of Foreign Investment in Industries” which was revised in 2002, PTA sector was adjusted from being in the restricted category to the encouraged category, and the suppressed demand for PTA was released rapidly, directly stimulating the upstream PX demand. Therefore, the consumption of PX in China increased significantly. During 2002-2011, China’s average annual growth of apparent consumption of PX reached around 21%.
However, China’s capacity growth of PX lags significantly behind the demand growth, the supply gap of PX has climbed year-on-year, and the import volume has also increased rapidly. China’s import volume of PX exceeded 1.0 million tons in 2003, increased to around 1.84 million tons and 3.7 million tons in 2006 and 2009, respectively, and reduced slightly to 3.53 million tons in 2010.
   In 2011 China’s output of PX reached 7.26 million tons, up 9.7% year-on-year, the import volume was 4.98 million tons, a year-on-year growth of 41.1%, the export volume reached 350 thousand tons, up 66.7% year-on-year, the apparent consumption reached 11.89 million tons, a year-on-year increase of 19.6%, and the self-sufficiency rate was 61.1%, down 5.5 percentage points. The main reason for the reduction of the self-sufficiency rate is that the capacity to make PX was not brought into full play due to the production suspension of some PX units and the restriction of transportation conditions.
   In the first ten months of 2012, China’s import volume of PX reached 5.11 million tons, up 25% year-on-year, and the export volume was 160 thousand tons, down 45% year-on-year. It is estimated that in 2012 China’s total import volume of PX will reach around 6.0 million tons, and the export volume will be around 200 thousand tons. In the next few years China will still need to import a large amount of PX. It is expected that by 2016 China’s PTA output will reached around 30.0 million tons, consuming around 19.7 million tons of PX; however, the domestic output of PX will be only around 12.2 million tons, so the supply gap of PX will reach 7.5 million tons and the self-sufficiency rate will be around 62%. China’s supply and demand of PX during 2006-2016 are listed in Table 2.

Table 2 China’s PX supply and demand, 2006-2016 (million tons)
Year    Output    Import volume    Export volume    Apparent consumption    Supply gap    Self-sufficiency rate (%)
2006    2 788    1 840    98    4 530    1 742    61.5
2007    3 742    2 903    252    6 393    2 651    58.5
2008    3 170    3 404    448    6 126    2 956    51.7
2009    4 800    3 705    333    8 172    3 372    58.7
2010    6 620    3 527    210    9 937    3 317    66.6
2011    7 260    4 982    348    11 894    4 634    61.0
2012(expected)    7 500    6 000    200    13 300    5 800    56.4
2016(expected)    12 200    7 700    200    19 700    7 500    61.9


5. Suggestions for China’s PX development

(1) Strengthen the development and application for the alkylation of toluene with new methanol technology
   Due to constraints of naphtha resource supply, the increase of PX output is still the future development direction of the aromatics sector. The alkylation of toluene with methanol is a new process route for increasing the output of PX, and China has recently achieved preliminary results in the industrial application of this technology. As a technology for the technical transformation of the existing aromatic complex units, the technology is used for the technical transformation of the existing toluene disproportionation units to increase PX output, and reduce the energy consumption and production cost of the units. On the other hand, the application of the technology for independently constructing new PX units can greatly reduce the production cost of PX through replacing the expensive adsorption separation unit with a simple crystallization separation unit. It is suggested that China should strengthen the development and application of the technology to promote the healthy development of the PX-PTA-PET industry chain.

(2) Objectively understand the dangers of PX, make reasonable decisions, open the information to the public, and accelerate construction
   Since 2007, citizens have protested about PX in Xiamen, Dalian and Ningbo, which has led to the relocation and deferred construction of the individual PX projects. The belief that PX is poisonous and causes cancer is actually a misunderstanding. PX has low toxicity, and is volatile and flammable. There is no evidence that it is carcinogenic or teratogenic. Of course, like many chemical plants, PX units have a certain risk and will inevitably discharge some pollutants like waste gas and waste water in the production process. Another controversial issue is safety protection distance. Safety should not rely only on distance, but should mainly rely on taking a series of measures to reduce risk. China should objectively understand the dangers of PX, make reasonable decisions and open the information to the public on the premise that the risk is manageable.
   Building PX units features difficult engineering construction, a high production technology threshold, big investment and long investment recovery cycle, and operations are restricted by the raw material naphtha resource. Most PX units are constructed in tandem with large-scale oil refining projects and are restricted by them. Therefore, a PX project has a long construction cycle and its construction often lags behind schedule. In addition, considering the citizens’ protests against PX in local regions, the capacity expansion of PX in China is severely hampered. The examination and approval of PX projects will become more difficult; however, considering the huge production scale of new PTA units in recent years and the pressure on the balance between PX and PTA in the future, China should strengthen the development of PX.
   Only by speeding up the capacity expansion of PX, the pressure being exerted by the constant increase of dependence on imports can be fundamentally eased, and the security of the polyester industry chain can be guaranteed. Therefore, China should accelerate the PX projects now under construction to guarantee China’s supply of PX and resist the risks in the international market.

(3) Implement the source of raw materials and encourage the diversification of investments
The petrochemical plants have rich profits; however, the entry threshold to the petrochemical industry is higher. Due to the monopoly in the raw material market, it is very difficult for general enterprises to get involved in oil refining projects. In contrast, it is easier for them to become involved in PX projects first. In recent years, although the entry of joint ventures and private enterprises has broken the monopoly of the PX supply in China previously held by large state-owned oil groups, still, because some enterprises depend on imported raw materials, it is difficult for them to have sustained and rapid development.
   In the future, under the premise of the implementation of naphtha raw material sources, especially a stable foreign aromatic hydrocarbon resource, it is appropriate to encourage Chinese enterprises to jointly construct PX units with foreign companies in order to alleviate China’s tight supply of PX and optimize the production layout.
The Middle East has abundant reserves of ethane and propane with a low cost. In recent years, the olefin units with drastic development in the region basically use this kind of high-quality raw materials, and the naphtha produced in the Middle East is mostly for export. In addition, Africa, and South and Central America are also important exporters of naphtha. If separately constructing the aromatic units, the domestic enterprises can consider importing naphtha raw material from these regions.
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