China's Acrylic Acid Industry Enters an Era of Meager Profit

During March, the market price of acrylic acid in eastern China dropped more than 8%, and that of butyl acrylate dropped more than 7%. Meanwhile, the prices of other acrylic esters fell more than 3%. China's acrylic acid industry is being dragged down by unfavorable macroeconomic conditions, weak downstream demand and excessively rapid growth of the production capacity for acrylic acid worldwide.
Affected by the sluggish downstream polypropylene market, the price of propylene, a raw material of acrylic acid, fell more than 6% in Shandong province during March.
Market participants' confidence in acrylic acid wanes as the price of propylene decreases and the demand for acrylic acid in downstream industries remains weak.
China's production capacity for acrylic acid has been boosted in recent years. According to statistics, three acrylic acid production units – a 60 kt/a unit of Yixing Sanmu Group, a 160 kt/a unit of Jiangsu Jurong Chemical and a 140 kt/a unit of CNOOC Huizhou Company – were put into operation in 2012. By the end of 2012, the total capacity for crude acrylic acid in China exceeded 1.6 million t/a, and the output in 2012 was over 1.2 million tons. Meanwhile, the capacity for acrylic esters reached 1.7 million t/a with an average annual growth rate in recent years of more than 10%.
As coal-to-olefin and PDH (propane dehydrogenation) projects go into operation, China's acrylic acid industry ushers in a new round of capacity expansion. In 2013, plants of Jiangsu Sanmu Group, Shandong Kaitai Group, Wanzhou Petrochemical, Yip's Chemical and Shandong YanKuang Group will be put into operation, while construction projects of Zhejiang Satellite Petrochemical and Wanhua Chemical (formerly known as Yantai Wanhua) will be completed. Therefore, the competition in China's acrylic acid industry will be intensified.
Acrylic acid is mainly used to manufacture acrylic esters, while the most promising products of all deep-processing products of acrylic acid are super absorbent polymers (SAP), which have wide application in industries such as aerospace, electronics, commodities, health care and agriculture. As the world's most populous country, China has huge consumer sectors with both improving buying power and an appetite for consumption. Therefore, SAP has a bright future in China. In 2012, several enterprises including BASF-YPC and Zhejiang Satellite Petrochemical announced that they began to build SAP production facilities.
However, SAP only accounts for a small portion of the total consumption of acrylic acid in China. Even if the development of SAP in China reaches a world-class level, the total consumption of acrylic acid for the production of SAP will still be limited. Currently, the demand for acrylic esters in industries related to real estate such as coatings and bonding agents is weak. Developing new application fields for acrylic esters seems to be an intractable problem for the industry.
Competition in the global acrylic acid market is fierce. The operation rate of Dow Chemical’s production units has hovered around 70% in recent years, and the company is planning to sell its acrylic acid and esters business in Texas. In April 2013, Tasnee & Sahara Olefins Company (TSOC) announced that its 160 kt/a butyl acrylate unit will be put into operation in late June or early July. Affected by the Japan catalyst SAP factory explosion, in 2012, China's import volume of acrylic acid (and salts) was 53 kt, and the export volume was only 69 kt; its import volume of butyl acrylate was 37 kt, and the export volume was only 31 kt.
In the next few years, the expansion rate of the production capacity for acrylic acid will be larger than the growth rate of downstream demand both in the global and domestic markets. Especially in China, the domestic acrylic acid market will stay tough due to the severe supply/demand imbalance.