Troubled Bisphenol A Sector: Profit Margins Shrink Sharply

By Zhang Bei, China National Chemical Information Centre


Sharp decline in profits delays new projects

In recent years, China’s bisphenol A capacity has grown quickly, from about 600 kt/a in 2012 to 880 kt/a in 2014. The increase was contributed mainly by a new 135 kt/a bisphenol A unit of Taiwan Changchun Chemical Co., Ltd. and a 15 kt/a capacity expansion by Huizhou Zhongxin Chemical Co., Ltd. For details of the main domestic bisphenol A manufacturers in 2014, see Table 1.
In 2014, bisphenol A profits declined sharply due to the decline in the nation’s overall economic situation. In the second half of 2014, most bisphenol A manufacturers were losing money in current production and postponing new projects. Still, in 2015, a 150 kt/a unit of Taiwan Nan Ya Plastics Corporation and a 120 kt/a unit of Lihuayi Group Weiyuan Chemical Co., Ltd. have been put into production. Projects of a 200 kt/a unit of Bayer (Shanghai) Polymers Co., Ltd., a 200 kt/a unit of Sinopec SABIC Tianjin Petrochemical Co., Ltd. and a bisphenol A unit of Yangzhou Shiyou Chemical Co., Ltd. are all delayed.

China’s consumption pattern differs greatly

In 2014, total consumption of bisphenol A worldwide was 5.4 million tons, with 67% used to make polycarbonate and 30% used for epoxy resin. The remaining 3% is used for making polyetherimide, polysulfone resin, polyarylester and phenoxy resin, etc.
In 2014, the total consumption of bisphenol A in Chinese market was about 970 kt. In contrast to the rest of the world, 66% was used to make epoxy resins, 27% for polycarbonate and the other 7% for fire retardants, polysulfone resins, polyphenyl resins, unsaturated polyester resins and other high-polymer materials. This difference between consumption here and abroad is due mainly to the rapid development of China’s epoxy resin industry. While a few polycarbonate manufacturers do exist here, China basically relies on imported products.
It is expected that the development of epoxy resin will slow down. In contrast, polycarbonate is a new material involved in national high- and new-technology industrialization drives, and several new polycarbonate plants will be started up in the coming years. If these units are put into operation as scheduled, much more bisphenol A will be used for making polycarbonate. It is estimated that the consumption of bisphenol A in China will exceed 2 million tons in 2019.

Price keeps declining

In 2011, China’s bisphenol A market became stagnant due to the falling prices of crude oil and weak market demand. From 2012 to 2013, domestic bisphenol A prices stayed low, hovering at RMB12 000-15 000/t. Especially in the second half of 2013, bisphenol A production suffered losses across the board. From January to May 2014, bisphenol A prices did not fluctuate significantly. They began to rise in June, peaked in September, fell far in October, and fell below RMB10 000/t at the end of the year. From January to May 2015, bisphenol A price fluctuated at RMB9 900-11 000/t, but started to decline sharply in June, from RMB10 000/t to less than RMB9 000/t. The main reasons are that raw material prices declined significantly, and the operation of newly built units quickly increased the domestic supply, causing prices to drop sharply. Refer to Figure 1 for more details.

Table 1  Main domestic bisphenol A manufacturers, 2014

Company    Capacity (kt)
Taiwan Changchun Chemical Co., Ltd.    270
Bayer (Shanghai) Polymers Co., Ltd.    210
Sinopec Mitsubishi Chemical Polycarbonate (Beijing) Co., Ltd.    150
Sinopec Mitsui Chemicals Co., Ltd    120
China National BlueStar (Group) Co., Ltd.     90
Huizhou Zhongxin Chemical Co., Ltd.    40
Total    880


Import dependence

China’s foreign trade of bisphenol A has been import-heavy. The annual import volumes in recent years (excluding 2010) were more than 500 kt. The import volume declined greatly in 2014 to 499 kt, down 15.4% YoY. Very few bisphenol A has been exported. The export volume was about 6 000-7 000 tons before 2012, dropped to about 334 tons in 2012, increased slightly to 430 tons in 2013, and reached 1 000 tons in 2014. Refer to Figure 2 for more details.

Development

Inventory overages of manufacturers are increasing due to weak demand, leading to continual profit shrinkage. In 2014, manufacturers’ profit margin was RMB2 000-3 000/t. In 2015, it fell below RMB1 000/t, affected by the activation of new production capacity.
Several enterprises will persist in building new bisphenol A units and put them into operation in the next few years, probably doubling the total production capacity and intensifying market competition. bisphenol A supply and demand in China will also experience great changes, with the import volume declining and export volume increasing.