Status of  PDH in China

By Li Jian

1. Supply and demand for propylene in China

China's propylene capacity growth lags far behind the growth of the demand from makers of downstream derivatives, and the gap widened constantly. So China imports more propylene each year (see table 1).
In October 2013, Tianjin Bohai Chemical Industry Group Co., Ltd. started up a propane dehydrogenation (PDH) unit – China’s first unit to make propylene this way. In 2014, the capacity of PDH units in East China expanded rapidly – Zhejiang Satellite Energy Co., Ltd., Ningbo Haiyue New Materials Co., Ltd. and Zhejiang Shaoxing Sanjin Petrochemical Co., Ltd. all started up PDH units.
With the progress of the shale gas revolution, the supply of raw material propane has increased rapidly while the price of propane has decreased, effectively improving the profitability of PDH projects in general.
China reduced the import tariff on propane from 5% to 2% in 2011, and further, from 2% to 1% in 2012, reducing the cost of importing propane. The expected high profitability combined with the low tariff make many enterprises willing to invest to construct PDH units.

Table 1   China’s supply and demand for propylene, 2010-2014

Year    2010    2011    2012    2013    2014
Capacity (kt/a)    16 100    18 100    18 880    20 965    25 010
Output (kt)    13 680    15 020    15 200    15 250    16 500
Import volume (kt)    1 520    1 760    2 150    2 640    3 050
Apparent consumption (kt)    15 200    16 780    17 350    17 890    19 550
Equivalent demand (kt)    21 500    23 100    24 000    26 000    29 700


Table 2   China’s PDH units for making propylene, 2013-2014

Producer    Location    Capacity (kt/a)    Startup time
Tianjin Bohai Chemical Industry Group    Tianjin     600    Phase I, October 2013
Zhejiang Satellite Energy Co., Ltd.    Zhejiang province    450    August 2014
Ningbo Haiyue New Material Co., Ltd.    Zhejiang province    600    September 2014
Zhejiang Shaoxing Sanjin?Petrochemical Co., Ltd.    Zhejiang province    450    Phase I, September 2014
Total         2 100    




2. The key element of China’s PDH sector – import of raw material

Propane is the main component of liquefied petroleum gas. Its main traditional applications are in residences and as industrial gas. Before the rise of China’s PDH sector, imported propane was rarely used as a chemical raw material, and its import was declining. After 2013, the development of the PDH sector boosted the import of propane substantially.
According to customs data, China imported 2 454 kt of propane in 2013, up 30.4% year-on-year, and 4 753 kt in 2014, up 93.66%. The main driver of the growing import of propane is the manufacture of propylene by PDH.
In 2014, Tianjin Bohai Chemical Industry Group, Zhejiang Satellite Energy Co., Ltd. and Ningbo Haiyue New Material Co., Ltd. were among the top 10 consumers of imported propane. Some petrochemical enterprises bought propane raw material from the traditional propane importers like Oriental Energy Co., Ltd.
The shale gas revolution in the United States is conducive to China’s import of propane. In 2014, the United Arab Emirates, the United States, Qatar, Kuwait and Nigeria were China’s top five sources of imported propane, accounting for 88.34% of the total import volume. China’s major import source of propane was still the Middle East, but it is noteworthy that China’s import volume of propane from the United States increased significantly, from less than 100 kt in 2013 to over 750 kt in 2014, up 659%, mainly because the scale of shale gas exploitation expanded constantly.


Table 3    China’s PDH units being built 2015-2016

Producer    Location    Capacity (kt/a)    Startup time
Zhangjiagang Yangzijiang? Petrochemical Co., Ltd.    Jiangsu province    600    second quarter of 2015
Yantai Wanhua Chemical Group Co., Ltd.     Shandong province    750    second quarter of 2015
Hebei Haiwei Chemical Co., Ltd.    Hebei province    500    third quarter of 2015
Fujian Meide Petrochemical Co., Ltd.    Fujian province    660    Phase I, 2016
Ningbo Fuji?Petrochemical Co., Ltd.    Zhejiang province    660    Phase I, 2016
Total        3 170    


3. Prospect

This year, there will probably be three new PDH units in China, adding capacity of 2 010 kt/a and making China’s total capacity 4 110 kt/a. Next year, there will likely be two more new PDH units in China with a combined capacity of 1 160 kt/a, driving the national capacity to 5 270 kt/a. PDH will then become the sector with the greatest effect on total domestic propane demand, and consequently, the main driver of the growth of propane import.