PU Industry Demand for BDO Will Grow Steadily in China

By Zhu Changchun, Secretary General of China Polyurethane Industry Association

BDO (1,4-butanediol) is an important organic and fine chemical raw material widely used in various sectors – chemicals, pharmaceuticals, textiles, papermaking, automobile, cosmetics and pesticides. It is also used to produce tetrahydrofuran (THF) as well as its polymers, gama-butyrolactone (GBL), N-methyl-2-pyrrolidone (NMP), N-vinyl-2-pyrrolidone (NVP), polyvinyl-2-pyrrolidone (PVP) and so on. The rapid rise of polyurethane (PU) and polybutylene terephthalate (PBT) engineering plastics has promoted rapid development of the BDO sector.

   1. China’s BDO capacity will be in surplus

   In Europe and the United States, the BDO market is saturated, and less new capacity is now being added. The newly added BDO capacity in the world is concentrated mainly in Asia, especially China (see table 1). In the next few years, BDO projects with a total capacity of 1.1 million t/a will be planned for construction in China (see table 2). It is expected that China’s total capacity to produce BDO will reach more than 2.8 million t/a in the next five years. With the rapid growth of BDO capacity in China, the world’s capacity to make BDO will likely exceed 4.0 million t/a.
   Pressured by the global financial crisis, Europe and the United States have implemented protectionist trade policies. As the largest BDO producer in the future, China will face big pressures, and China’s ability to consume its own BDO output will be greatly reduced. The growth of downstream sectors lags far behind that of the BDO capacity, so the BDO producers around the world will face great sales pressure. China’s BDO production mostly uses the Reppe process, which is energy intensive. The low carbon economy will also bring new challenges to the Chinese BDO enterprises. The problems between production, energy consumption and environmental pollution should attract a great attention.

Table 1   BDO Projects Being Built in China

Producer                Capacity (thousand t/a)    Production process    Startup time
China Guodian Younglight Energy Chemical Group Co., Ltd.200    Reppe process    2013
Shandong Zibo Jiazhou Chemical Co., Ltd.    50    Maleic anhydride process?    2013
Chongqing Jianfeng Chemical Co., Ltd.    100    Reppe process?    2014
Chongqing Chiyuan Chemical Co., Ltd.     60    Reppe process?    2014
Inner Mongolia Dongyuan Scien-Tech Co., Ltd.    100    Reppe process?    2014
Xinjiang Tianye (Group) Co., Ltd.    170    Reppe process?    2014
Xinjiang Markor Group    100    Reppe process?    2013
Hemei Company of Henan Coal Chemical Group     50    Reppe process?    2013
Total    830        

Table 2   BDO Projects Being Planned for Construction in China

Producer                  Capacity (thousand t/a)    Production process
Sinopec Sichuan Vinylon Works         200             Reppe process
Chongqing Heyou Alkali-Amine Industry Co., Ltd.    130     Reppe process
Shaanxi Bidiou Chemical Co., Ltd.????(the second-phase)    100    Reppe process
China Guodian Younglight Energy Chemical Group Co., Ltd.?    100    Reppe process
Inner Mongolia Dongyuan Scien-Tech Co., Ltd.(the second-phase) 200 Reppe process
Inner Mongolia Guangyuan Group                              60    Reppe process
Shanxi Sanwei Group (the fourth-phase)                     100    Reppe process
Daqing Oilfield Chemical Co., Ltd.                  65    N-butane process
Taiwan Changchun Group (Panjin)                     150    Allyl alcohol process
Total    1 105    


   2. PU has a broad application

   By the end of 2015, China’s capacity to make PU will reach 9 million-10 million t/a, and through the innovation of science and technology, China’s production technology and product quality will reach the international level. China will preliminarily form a PU material industrial system with rational layout, environmental protection, low carbon and high efficiency.
   At present, China produces 95% of the world’s refrigerated containers, 60% of its shoes and 70% of its toys. Secondly, China's output of building materials, spandex, textiles, synthetic leathers and automobiles all rank first in the world. The country's rapid urbanization, increased high-speed railway investment and growing demand for environment-friendly synthetic wood offer huge market opportunities for the PU industry.
   China’s total output of PU reached 7.8 million tons in 2012, including 3.2 million tons of PU foam plastics, 350 thousand tons of PU fibers (spandex), 600 thousand t/a of PU elastomers (including casting PU elastomers (CPU), thermoplastic PU elastomers (TPU) and waterproof surfacing materials), 1.95 million tons of PU synthetic leather sizing agents and shoe sole fluids (containing solvent), 1.3 million tons of PU coatings, and 400 thousand tons of PU adhesives and sealants, up 11.5% over 2011. China has become the leading producer and consumer of PU in the world, and by the end of 2012, China’s output and sales volume of PU accounted for more than 40% of the world total. China’s projected output of PU is listed in Table 3.

   3. Brisk demand for BDO in PU industry

   PU is the largest consumption sector of BDO in China, accounting for around 58% of the total consumption, and other consumption sectors of BDO include PBT, polybutylene succinate (PBS) and GBL, etc., accounting for over 40%.
   (1)Spandex
   In 2003, the rise of China’s spandex sector stimulated the growth of demand for polytetrahydrofuran ether glycol (PTMEG), promoting the consumption of BDO. China’s consumption of BDO reached 232 thousand tons in 2007. Given the impacts of the global financial crisis, China’s BDO consumption was reduced to 229 thousand tons in 2008. However, in 2009, with the capacity expansion of downstream raw materials including PTMEG, the consumption of BDO increased significantly to 290 thousand tons, and China also imported around 50% of the PTMEG it consumed. Since 2009, many enterprises have announced plans to construct PTMEG units. In 2012, China’s capacity to make spandex reached 480 thousand t/a, over 60% of the world total, and 350 thousand tons of spandex was consumed in China. There are 17 enterprises with a capacity of over 10 thousand t/a each. China has become the leading producer, consumer and exporter of spandex in the world.

Table 3   Projection of the Output of PU in China   (thousand tons)

PU products        2012    2013 (expected)    2017 (expected)    Average annual growth (%)
Foam plastics    3 200    3 550            4 800              7.0
Coatings        1 300    1 450            1 900              7.9
Adhesives/sealants    400    450                600                  8.4
Synthetic leather sizing agents    1 600    1 680    2 400      8.4
Shoe sole fluids    350    360                430                  4.2
Spandex                350    380                550                  9.5
Elastomers            600    730                1 020              11.2
Total                7 800    8 600        11 700              8.4


   In the current process technology, more than 90% of spandex products use PTMEG as raw material. In 2012, China’s output of PTMEG for spandex production reached 183 thousand tons, and the import volume was 120 thousand tons. In the next few years, the average annual capacity growth of PTMEG will reach over 18%. In view of the average operating rate of domestic PTMEG units in the last three years, the average annual growth of BDO consumption in the PTMEG sector is expected to reach more than 10%.
   (2)Synthetic leather sizing agents
   In 2012, China had more than 70 PU synthetic leather sizing agent enterprises with a capacity of 2.4 million t/a, and their output was over 1.6 million tons. Except for a few high-grade synthetic leathers with PTMEG as raw material, most PU synthetic leathers use polyester polyols (AA-BDO and AA-BDO-EG, etc.) as raw materials. At the same time, a certain amount of BDO is used as chain extender. The domestic PU synthetic leather sizing agent sector is conducting a new round of integration, with the capacity concentrating in large enterprises. In 2012, China had around 10 PU synthetic leather sizing agent producers with an output of over 50 thousand tons each. Factories with a capacity lower than 1 thousand t/a will be eliminated.
   China’s PU synthetic leather sizing agents are used mainly to make four categories of products including shoe upper leathers, bag leathers, furniture leathers and garment leathers. However, in recent years, with the rapid growth of automobile output, PU sizing agents for producing automotive leathers have a larger space for development.
   China’s synthetic leather market tends to be stable, so a rigid demand for synthetic leather sizing agents still exists there. Supported by the national tax rebate policy, export of synthetic leather sizing agents will continue to increase. At present, domestic synthetic leather sizing agent enterprises still face many problems such as the overall low level of technology, single-product portfolios and serious product homogenization; and they are greatly affected by price changes of BDO, the main raw material. It is expected that the average annual growth of PU synthetic leather sizing agents will remain at around 8% in the next few years.
   (3)Shoe sole fluids
   In 2012, the domestic output of shoe sole fluids was around 350 thousand tons, and China had over 20 shoe sole fluid enterprises with a capacity of over 1 thousand t/a each. PU shoe sole fluids can be divided into two categories – polyether (polyether polyol (PPG)) and polyester (PBA and PBEA). At present, the polyester-type products using BDO as raw material have an absolute advantage. The output of the top five enterprises accounts for around 90% of the national total, of which Huafeng Group produces 50%. Since 2009, China’s demand for shoe sole fluids has grown abnormally. In spite of a substantial increase of demand, the profits of shoe sole fluid enterprises have not been encouraging. In the next few years, China’s export of shoes will continue to be restricted by many factors; however, the downstream terminal shoe factories will be in favor of PU shoe soles with low prices and excellent quality, thus driving up the demand for shoe sole fluids. At present, the domestic proportion of polyester-type sole fluids is higher. With increased requirements on shoe quality, the demand for polyether-type products is likely to grow, thus restraining the growth of BDO demand. If the total output of shoe sole fluids is unchanged, the consumption of BDO is likely to be reduced.
   (4)Elastomers(TPU、CPU)
China consumed around 600 thousand tons of PU elastomers in 2012, including over 350 thousand tons of CPU (including waterproof surfacing materials) and around 200 thousand tons of TPU. Elastomers is the fastest growing PU sector, mainly using polyester polyols with BDO as raw material. It has already become one of the biggest consumers of BDO in the PU industry, second only to PTMEG. The TPU sector has developed in China for around 20 years; however, the domestic market for high-end products has been dominated by foreign companies like BASF, Bayer, Noveon and Huntsman. In spite of being the largest TPU producer in China, Yantai Wanhua Polyurethanes Co., Ltd.’s product coverage is very narrow, and this is a common problem for a large number of domestic producers. In recent years, TPU players have enjoyed better than double-digit growth, and the demand from makers of shoe materials, films, pipe materials and hot melt adhesives has been brisk. With the capacity expansion for PU raw materials like isocyanate, the prices of high-grade elastomers have tended to be reasonable. Players have begun to accept this kind of product that has a larger market space. It is expected that the average annual growth of PU elastomers will remain at over 12% in the next 3 years, so the average annual growth of BDO demand in the PU elastomers sector will be no lower than 10%.
   (5)Coatings and inks
   PU coatings and inks have been widely used in high-grade wood paints, high-grade automotive paints, aircraft dope, building coatings, heavy-duty anti-corrosive coatings and plastic coatings, etc. In 2012, the domestic consumption reached more than 1.3 million tons, second only to synthetic leather sizing agents. Makers of PU coatings and inks mainly use polyester polyols containing BDO as a raw material to react with isocyanate to obtain better adhesion and cohesive strength.

   4. The future of the BDO sector relies on comprehensive development

   China’s PU industry started in the 1960s. In the last ten years, with the constant growth of basic raw material industry, the downstream product industry has also developed rapidly. However, China is a big country rather than a strong country in the PU industry. In the next few years, China’s PU industry will enter a stable period of development and the demand for BDO may not grow explosively. It is expected that the average annual growth of BDO demand in China’s PU industry will be around 10% in the next 3 years. Players need to speed up the dissemination and application of BDO in sectors like PBT, GBL and PBS.