Refined Ethylene Oxide: Surplus Capacity, No More High Profits

By Lu Xianfeng and Zhang Yueli, China National Chemical Information Center

Capacity expands rapidly

Commercial production of ethylene oxide (EO) in China started in the 1960s. EO/ethylene glycol (EG) co-production units were first introduced from abroad in the 1970s. From 2002 to 2011, EO was in short supply in China, so the average operating rate of EO units in China was always over 90%. The capacity for refined EO in China was around 1.73 million t/a in 2012, and the average operating rate of EO units decreased to around 85%. Capacity increased further to 2.53 million t/a in 2013, and the average operating rate at that time was less than 70%. Operating rates were low in 2013 mainly because the growth of downstream industries was slower than the growth of EO capacity and some newly constructed EO units had not started operation yet. In the future, capacity for refined EG will be in surplus in China. Figure 1 shows the changes in capacity and output of EO in China during 2002-2013.
Since the production of EO has been highly profitable in China, many private and foreign-funded companies were attracted to invest in the industry. Considering the large number of EO units now planned for construction, overcapacity will be intensified in the future. It is expected that the capacity for refined EO in China will reach more than 4.50 million t/a in 2017 and the average annual growth rate will be over 20% during 2012-2017.

Industrial pattern changes

With of great quantities of private and foreign capital entering China’s EO sector, the production structure in China has changed in recent years.
(1) Private enterprises and foreign enterprises keep coming in. Before 2011, China’s EO units were mainly owned by large petrochemical enterprises like Sinopec and PetroChina since they produce the raw material ethylene. However, in recent years, private and foreign-funded enterprises such as Sanjiang Chemical Co., Ltd., Dynamic (Nanjing) Chemical Co., Ltd., Liaoning Oxiranchem Inc. and Akzo Nobel (China) Investment Co., Ltd. have swarmed into the EO industry.
The capacity for refined EO in China was 2.53 million t/a in 2013. Sinopec’s capacity was around 1.10 million t/a, accounting for 43%. PetroChina’s capacity was around 250 kt/a, accounting for 10%. See Table 1 for details.
(2) Ethylene sources are diversified: EO is made from ethylene. In previous years, EO units in China were all matched to large petroleum-cracking ethylene units and used petroleum ethylene exclusively as the primary raw material. In recent years, however, ethylene sources have been diversified. Large petrochemical enterprises such as Sinopec and PetroChina all use their own ethylene generated from petroleum cracking as raw material to produce EO. Sanjiang Chemical Co., Ltd. uses imported ethylene to produce EO. Some enterprises, such as Shandong Tengzhou Chenlong Energy Sources Group Co., Ltd., Shandong Heze Yuhuang Chemical Co., Ltd., Suzhou BBCA Biochemical Co., Ltd. and Zhengzhou Coal Industry Group Shangqiu Zhongya Chemical Co., Ltd., use ethanol as raw material to produce ethylene that, in turn, is used to produce EO. Ningbo Heyuan Chemical Co., Ltd. uses MTO as its ethylene source. Nanjing Wison New Material Co., Ltd. and Shandong Haoda Chemical Co., Ltd. are also constructing new EO units that will use MTO as the ethylene source. In the future, the competition among enterprises using different ethylene sources will become fierce.
(3) Competition downstream from the increasingly popular coal-to-EG technology will worsen the overcapacity of the refined EO sector: the manufacture of EG is currently the biggest use of EO in China. Around 67% of EO produced through the petroleum ethylene process is directly used to produce EG. The capacity of coal-to-EG units that were already on stream in 2013 included 150 kt/a of Tongliao GEM Chemical Co., Ltd., 600 kt/a of Henan Coal Industry Group Co., Ltd. (including Anyang Yongjin, Puyang Yongjin and Xinxiang Yongjin), 50 kt/a of Hualu Hengsheng Group Co., Ltd. and 50 kt/a of Xinjiang Tianye Group Co., Ltd. The capacity of coal-to-EG units presently under construction is more than 6.00 million t/a. The coming large-scale application of coal-to-EG technology will surely worsen the refined EO sector’s capacity surplus.

Industrial chain is extended and new products are developed

As a considerable amount of new capacity for EO will continue to be constructed in China in the near future, the total capacity will grow rapidly. Changes in the production and consumption structures of EG and glycol ether in the major application sectors will aggravate the overcapacity for refined EO. Consider Sanjiang Chemical Co., Ltd. and Liaoning OxiranChem Inc., two representative examples:
Sanjiang Chemical Co., Ltd. is the biggest EO producer in China today. Its capacity for EO is around 430 kt/a. Its other major products include fatty alcohol polyoxyethylene ether (AEO). The company plans to construct a new 200 kt/a EO unit along with a matched EG unit. In addition, it acquired an MTO enterprise in 2012 so as to minimize the cost and stabilize the supply of raw material ethylene. The company is creating an extended industrial chain: ethylene – EO – EG/AEO.

Table 1    Major EO producers in China, 2013 (kt/a)

Producer                               Capacity           Remark
Sinopec Yangzi Petrochemical Co., Ltd.
186    petroleum ethylene process
Sinopec Shanghai Petrochemical Co., Ltd.     
286    petroleum ethylene process
Sinopec Zhenhai Refining & Chemical Co., Ltd.     
100    petroleum ethylene process
BASF-YPC Co., Ltd.     150    petroleum ethylene process
Sinopec-SABIC (Tianjin) Petrochemical Co., Ltd.    
40    petroleum ethylene process
Sinopec Tianjin Petrochemical Co., Ltd.     
38    petroleum ethylene process
Sinopec Beijing Yanshan Petrochemical Co., Ltd.     
17    petroleum ethylene process
Sinopec Maoming Petrochemical Co., Ltd.     
128    petroleum ethylene process
Sinopec Wuhan Petrochemical Co., Ltd.     
150    petroleum ethylene process
Subtotal of Sinopec    1 095    
PetroChina Jilin Petrochemical Co., Ltd.     
110    petroleum ethylene process
PetroChina Liaoyang Petrochemical Co., Ltd.     
100    petroleum ethylene process
PetroChina Fushun Petrochemical Co., Ltd.     
40    petroleum ethylene process
Subtotal of PetroChina    250    
CNOOC-Shell Petrochemical Co., Ltd.     
100    petroleum ethylene process
Liaoning Huajin Chemical (Group) Co., Ltd.     
170    petroleum ethylene process
Sanjiang Chemical Co., Ltd.     
180    uses imported ethylene as raw material
Sanjiang Honam Chemical Co., Ltd.     
250    joint venture between Sanjing Chemical Co., Ltd. and Lotte Chemical Co., Ltd. of Korea
AkzoNobel (China) Investment Co., Ltd.     
73    mainly used in the company’s 35 kt/a vinyl amine unit
Dynamic (Nanjing) Chemical Co., Ltd.     
60    mainly used in the company’s 100 kt/a glycol butyl ether unit
Shandong Tengzhou Chenlong Energy Sources Group Co., Ltd.     
60    ethanol process
Shandong Heze Yuhuang Chemical Co., Ltd.     
60    ethanol process
Suzhou BBCA Biochemical Co., Ltd.     
20    ethanol process
Zhengzhou Coal Industry Group Shangqiu Zhongya Chemical Co., Ltd.     
60    ethanol process
Taixing Dantian Chemical Co., Ltd. (Jinyan)    
60    petroleum ethylene process
Qianjiang Yong’an Pharmaceutical Co., Ltd.     
40    ethanol process
Ningbo Heyuan Chemical Co., Ltd.     
50    use ethylene from MTO as raw material
Subtotal 1 083    
Total    2 528    


Liaoning OxiranChem Inc. has already made arrangements for the production of EO derivatives around the EO producing areas in Northeast China, East China and South China. Its major products today include polyether monomers and crystalline silicon cutting fluid. The company is constructing a 200 kt/a EO unit and a 300 kt/a ethylene carbonate/dimethyl carbonate unit in Yangzhou Industry Park. Liaoning OxiranChem Inc. is also extending the EO industrial chain upstream and expanding the production of other EO derivatives downstream.
In addition to those companies, Akzo Nobel (China) Investment Co., Ltd., BASF-YPC Co., Ltd. and Jilin Zhongxin Chemical Group Co., Ltd. have set good examples in extending their industrial chains and fostering the production of EO derivatives.
At a time when the makers of refined EO face certain overcapacity in the future, extending industrial chains both upstream and downstream and actively developing new EO derivatives are obvious development strategies. And similar development directions certainly make sense for the producers of EO derivatives.