Overall Capacity Surplus of the Acetic Acid Industrial Chain in China

By Sang Jianxin, Li Zejiang, China National Chemical Information Center

Acetic acid is an important organic chemical product. It is mainly used in the production of vinyl acetate (VAM), acetic esters, acetic anhydride, p-phthalic acid (PTA), chloroacetic acid and diketene and is therefore an important raw material for synthetic fibers, adhesives, medicines, dyestuffs and pesticides. Besides, it is also an excellent organic solvent and has very extensive applications in several sectors: chemicals, light industry, textiles, plastics, pharmaceuticals, rubber and dyestuffs.

1. Capacity is in serious surplus

The main acetic acid production technologies used in China in the early days were the alcohol process and the ethylene process. The alcohol process was small scale and used now-outdated technology. With the price rise of crude oil, the ethylene process also started losing its value. The methanol carbonylation process uses coal as raw material and has a high yield. It was, for some time, an advanced technology for acetic acid production. Large foreign companies, however, conducted technical blockade to China for many years. In the mid-1990s the Southwest Research Institute of Chemical Industry completed its successful research on the methanol carbonylation process for the acetic acid production. In 1998 the first commercial acetic acid unit in China (100kt/a) was successfully wet-commissioned by Jiangsu Sopo (Group) Co., Ltd. This breakthrough in technology brought about a boom in capacity. All of a sudden the acetic acid sector in China started a new round of industrial upgrades. With the constant price rise of crude oil in the international market, after 1960 in particular, investment in the coal chemical sector surged in China, and acetic acid units using the methanol carbonylation process sprung up like mushrooms.
The capacity of acetic acid in China was 3.61 million t/a in 2007. According to incomplete statistics, there were around 30 acetic acid producers in China in 2012, the total capacity was 8.65 million t/a, and in the past 5 years, the average annual growth has been around 19.1%. East China is the major acetic acid producing region. The total capacity of 9 major producers in the region is around 5.58 million t/a, accounting for around 65% of the national total. Data from the National Bureau of Statistics show that the output of acetic acid in China was 4.298 million tons in 2012, the overall operating rate was around 49.6% and the capacity was already in serious surplus.
The capacity and output of acetic acid in China accounted respectively for 47.4% and 36.6% of the world total in 2012. China is now the biggest acetic acid producing country in the world.
Although the capacity of acetic acid is already in serious surplus, many new units are under construction or being planned. The capacity to make acetic acid will therefore continue to increase. The new 200kt/a acetic acid unit of Yunnan Yunwei Group Co., Ltd. and the 200kt/a glacial acetic acid unit of Henan Yima Gasification Plant will both start production in the second half of 2013. The total capacity of acetic acid in China will reach 9.05 million t/a at that time. Table 1 shows the production of acetic acid in China in 2007 and 2012.

Table 1   Production of Acetic Acid in China in 2007 and 2012  (kt)

Year    Capacity    Output    Operating rate (%)
2007    3 610    2 183    60.5
2012    8 650    4 298    49.7


Table 2    Consumption Balance of Acetic Acid in China in 2007 and 2012 (kt)

Year    Output    Import amount    Export amount    Apparent consumption    Gap    apparent consumption ratio (%)
2007    2 183    499    138    2544    -36.1    85.5
2012    4299    21    331    3989    -31.0    107.8


2. Consumption grows slower than capacity

The apparent consumption of acetic acid in China was 2.545 million tons in 2007 and reached 3.989 million tons in 2012. The average annual growth was around 9.4%, much lower than the average annual capacity growth of 19.1% in the same period. The slower growth of apparent consumption is the main reason for the serious capacity surplus of acetic acid in China today. If there are no major breakthroughs in downstream sectors, the surplus can hardly be changed.
The newer acetic acid units all have considerable scale. Operators of small units using outdated processes will undoubtedly suffer most from the surplus. The sector can no longer hope for high profits, high prices and low risk as seen in previous years. It will instead become relatively stable with thin profits. Table 2 shows the consumption balance of acetic acid in China in 2007 and 2012.
Based on the analysis of the consumption structure in 2012, the manufacture of vinyl acetate is the biggest consumption sector of acetic acid in China. Producing 1 ton of vinyl acetate needs around 0.723 tons of acetic acid in China today. Acetic esters such as ethyl acetate, butyl acetate, sec-butyl acetate and methyl acetate are all important organic solvents and have extensive applications in coatings, inks, adhesives and medicines, as well as in organic synthesis. Ethyl acetate is one of the fatty acid esters with the most extensive application, and the manufacture of ethyl acetate is the second biggest use of acetic acid. In PTA units the consumption of acetic acid is 38-45kg per ton of product. The manufacture of PTA has increased rapidly in recent years in China, and its consumption of acetic acid keeps going up, already holding third place. Acetic anhydride manufacture holds fourth place. Also, acetic acid is used to produce chloroacetic acid, diketene and acetates. There are still other applications in the pharmaceutical sector and the dyestuff/textile printing and dyeing sector.

3. Worries over development of the industrial chain

Methanol: There are more than 260 methanol producers in China today. Methanol capacity has grown rapidly in the past 12 years. In 2000, it was 3.48 million t/a; it increased to 7.20 million t/a in 2005 and reached 52.00 million t/a in 2012. The average annual growth of methanol capacity in China was 25.3% during 2000-2012. As the downstream market has experienced no such fast growth, methanol capacity has far exceeded market demand. The overall operating rate of methanol units was only 50.8% in 2012, as the capacity was already in serious surplus. Because MTO technology is already well developed in China, quite a few methanol units are under construction or being planned, in connection with MTO. The capacity growth will remain rapid, but increasing demand among the makers of downstream products such as alcohol ether fuels and olefins will ease the financial strain of the capacity surplus somewhat.
Vinyl acetate: With the change of the worldwide economic situation, both the production and consumption of vinyl acetate will shift to China. The number of vinyl acetate projects in China funded by foreign companies has increased somewhat. Domestic enterprises have also invested in plants in order to seize market share. The capacity in China has therefore increased drastically. With declining pressure from the worldwide financial crisis, in 2010, China’s vinyl acetate capacity reached 1.753 million t/a, surpassing the United States to make China the biggest vinyl acetate producer in the world. Capacity reached 3.10 million t/a in 2012, and the overall operating rate was around 60.7% due to evident capacity surplus.
Acetic esters: With attention to environmental protection, health and safety in China, the construction, automobile, flavor/spice and color printing sectors have developed rapidly in recent years. Foreign countries have also raised more stringent requirements on the safety and potential environmental impact of products exported by China. As a result, the demand for acetic esters in the domestic market has seen a sustained increase. Starting from 2006, China turned from being an importer of acetic esters to being an exporter of acetic esters. Ethyl acetate and butyl acetate are varieties with considerable consumption. The overall operating rate of ethyl acetate units in China was around 54.5% and the overall operating rate of butyl acetate units was around 65.4% in 2012.
PTA: Owing to the briskness of textile and polyester markets in China from 2002, PTA projects planned in previous years started production one after another. PTA production in China developed by leaps and bounds. The new capacity of PTA in 2012 was 6.50 million t/a, and the overall operating rate was around 76.8%. The massive capacity expansion affected the average operating rate. The average annual growth of the capacity was 22.7% and the average annual growth of the output was 23.1% during 2002-2012. The import of PTA reached 1.215 million tons in 2012, an increase of 5.2% over the previous year.
Others: Raw materials and technical routes for the chloroacetic acid production are quite diverse. The technology with the greatest competitiveness in the world today is the acetic acid chlorination process. Producers in China have always used this method. There were over 100 chloroacetic acid producers in China in 2010, and China’s capacity was the world’s largest. Chloroacetic acid produced in China occupies a considerable share in the international market today and the market has already matured. It is expected that the consumption proportion of chloroacetic acid will maintain the present status or decline.
There were more than 30 diketene producers in China in 2012, and the overall operating rate was around 47.8%. The capacity of diketene is already in serious surplus. China holds a considerable share of the international diketene market today, and the market already has matured. It is expected that the growth of diketene demand in China will slow down in the future.

Table 3   Production of Acetic Acid Upstream/Downstream Products in China

Product    Operating rate (%)    Remark
Methanol    50.8    capacity in surplus
Vinyl acetate    60.7    capacity in surplus
Ethyl acetate    54.5    capacity in surplus
Butyl acetate    65.4    capacity in surplus
PTA    76.8    capacity not in surplus, but the massive capacity expansion affects the average operating rate
Chloroacetic acid    62.5    capacity in surplus
Diketene    47.8    capacity in surplus


4. Capacity surplus is the major issue in development

The main problems in the acetic acid sector of China today are:
(1) Disorderly development has led to capacity surplus
As the labor cost in China is low, multinationals have adjusted their strategies in recent years. They have gradually shut down or reduced capacity for acetic acid and downstream products elsewhere and increased corresponding investments in China. In 2009, when the economy had not yet recovered, the acetic acid capacity in the Nanjing base of Celanese increased from 600kt/a to 1.2 million t/a. Sound benefits in the acetic acid production in China before 2007 also attracted lots of investment. Domestic acetic acid producers expanded production and there were numerous new entrants. The capacity of acetic acid in China increased by 2.4 times during 2007-2012 with an average annual growth of around 19%,while the consumption of acetic acid rose only 1.6 times, with the average annual growth of 9.4% as the development of acetic acid downstream sectors was however slow in that period. The acetic acid capacity is therefore in serious surplus.
(2) Capacity surplus in downstream products will aggravate the acetic acid capacity surplus
Acetic acid-based products such as vinyl acetate, acetic anhydride, chloroacetic acid, diketene and polyvinyl alcohol are already in states of oversupply and capacity surplus in China. There are still quite a few ethyl acetate and vinyl acetate units under construction or being planned. The capacity surplus will therefore get even worse. Due to the supply shortage of raw material n-butanol, the capacity of butyl acetate is in surplus. March 2013 an n-butanol unit of Luxi Chemical Group Co., Ltd. started production. In May 2013 an n-butanol unit of Jianlan Chemical Co., Ltd. was also put on stream. This capacity expansion triggered drastic price reductions. The prices of n-butanol slid RMB2 300/t in the first half of 2013, including reductions as great as 20%. The price of butyl acetate also went down with the price of raw material n-butanol. By the end of June, the market price of butyl acetate had fallen RMB1 025/t to RMB8 300/t. The demand for butyl acetate in the domestic market is still not enough to support the existing producers. Quite a few units are construction or being planned. The capacity will therefore still be in surplus in future. Due to the capacity surplus and the slack demand among the makers of downstream products, the capacity surplus of acetic acid in China will be further aggravated.
(3) Export market is unfavorable & cannot ease capacity surplus
The volume of acetic acid exported from China in 2012 was 49.6% lower than in 2011. The total volume of acetic acid in international trade was 2.809 million tons. The volume exported from China, whose acetic acid capacity is half of the world’s total, was only 331kt, accounting for less than 11.8%.

5. PTA becomes a focus to push the consumption of acetic acid

(1) PTA, now in short supply, is one of the keys to employing acetic acid capacity
In China, PTA is mainly used to produce PET resin and, in turn, polyester fiber and film. China is exporter of textiles and clothing. Due to constraints from upstream raw material PX, the output of PTA has not met the needs in the downstream polyester sector for many years. Great quantities have to be imported from abroad each year to bridge the gap. Quite a lot of PTA units are under construction or being planned in China. The capacity and the output of PTA will still increase rapidly in the future and will help to ease the capacity surplus of acetic acid.
(2) Seeking new downstream products becomes a focus in follow-up development
Few new application sectors have appeared for acetic acid over the years. Vinyl acetate and PTA, the biggest downstream products, have high requirements for technology and capital, so ordinary enterprises can hardly enter the market. Great attention should therefore be paid to the developing  new applications. Proposed R&D orientations include the following. (a) As China has a big population and a big textile industry, the application of acetic acid in the pharmaceutical sector and in the dyestuff/textile dyeing and printing sector has considerable growth potential. (b) Technical breakthroughs in cellulose acetate can promote the development of the textile sector and open other avenues for the use of acetic acid. (c) The synthesis of ethanol and acrylic acid can consume great quantities of acetic acid as raw material. It is a non-oil and non-cereal route for the synthesis of large-volume chemicals and has good technical and economic performance. The technical route also conforms to China’s resource structure of rich coal and lean oil/gas, and to the policy for the coal chemical sector advocated by the state.
(3) It is imperative to actively search for export channels for acetic acid
Few acetic acid units will be constructed in the foreseeable future in North America, South America, Western Europe, Central Europe, the Middle East, Africa, the Commonwealth of Independent States and the Baltic countries. Due to factors such as environmental protection and labor cost, the world’s acetic acid capacity will shift to China. The overall acetic acid capacity will remain stable or even decline. China should try its best to become a major supplier of acetic acid in the world.