Olefins: Competition Becomes Fiercer Downstream

By Gao Chunyu, CNPC Economics & Technology Research Institute

By the end of 2016, China’s ethylene capacity had grown to 22.15 million t/a, and propylene capacity was 33.20 million t/a. The diversification of raw materials for making oil-based ethylene is widening. PDH has already become a major driver for growing propylene capacity. The 2016 growth of apparent consumption is estimated to have been 9% for ethylene and 8.5% for propylene.

Growth of ethylene capacity employing naphtha as raw material is stagnant

With the completion of an 800 kt/a ethylene unit by PetroChina Sichuan Petrochemical Co., Ltd. in the first half of 2014, the growth of China’s ethylene capacity that uses naphtha as raw material ceased, for the time being anyway. The growth of ethylene capacity in China is therefore quite slow in recent years.
By the end of 2016 there were 38 ethylene producers and 46 ethylene units in China. Capacity was around 22.15 million t/a. The average annual growth of capacity during 2014-2016 had been only 4%.
China produced 19.50 million tons of ethylene in the first 11 months of 2016, an increase of 10.5% over the same period of 2015. Output for the whole year of 2016 is estimated to have been 21.30 million tons, an increase of 9.2% over the previous year.

Propylene capacity increases rapidly

By the end of 2016, China’s propylene capacity exceeded 33.20 million t/a. The average annual growth of capacity had reached 15% in the preceding two years, much faster than the demand growth of 7%.
As numerous coal chemical units and PDH units are put on stream, the previous pattern of propylene capacity has changed considerably. The historical proportion of propylene co-produced in the process of refining oil or producing ethylene has declined drastically. The proportion of propylene produced in coal chemical units and PDH units is now much higher.
By the end of 2016, there were nearly 100 propylene producers in China. The capacity of propylene was nearly 4.80 million t/a higher than in 2015. The new capacity for making propylene in coal chemical units was 1.08 million t/a. The new capacity for making propylene in PDH units was 2.21 million t/a. The capacity for making propylene in ethylene steam cracking units was around 8.43 million t/a, or 25.4% of the total. The capacity of propylene from FCC units in oil refining enterprises was around 10.90 million t/a, accounting for around 32.8%. The capacity for making propylene in emerging PDH units has increased rapidly in recent years, reaching 5.60 million t/a in 2016, accounting for around 16.9%. The capacity for making propylene in MTO, CTO, MTP and CTP units in the coal chemical sector was around 8.27 million t/a, accounting for around 24.9%.
The manufacture of CTO and MTO in China has developed quite rapidly in recent years. By the end of 2016, there were already 14 CTO and MTO units in China with a total capacity of 4.00 million t/a.  

Olefins import has broken bottlenecks

With constant completion of olefin tank farms and loading/unloading facilities in recent years, the import of olefins by China has broken many longstanding bottlenecks. Due to ethylene output and demand in the domestic market, however, the import of ethylene has always increased slowly. Due to an increase in propylene output, the import of propylene declined in 2015. China’s import of ethylene in 2016 is estimated to have been 1.64 million tons, and the import of propylene is estimated at 2.84 million tons (see Figure 1).

Ethylene is imported to China mainly from Korea and Japan. The total amount imported from Korea and Japan in 2015 was 1.28 million tons, over 80% of the total import volume (see Figure 2).


Propylene imported by China also comes mainly from Northeast Asia. The total amount imported from Korea, Taiwan and Japan in 2015 was 1.99 million tons, around 82% of the total import volume (see Figure 3).


Growth of olefins’ equivalent consumption has gradually slowed down

The growth of ethylene’s equivalent consumption in China has slowed down gradually since 2010 (see Figure 4). The drastically increased output of calcium-carbide-process PVC and coal-based ethylene glycol has further reduced the demand for ethylene among the makers of these two downstream products. Also, proliferation of technology for making ethyl benzene from dry gas has reduced the proportion of ethylene consumed in styrene production.


The growth of ethylene’s equivalent consumption in China was 9.7% during 2005-2010 but only 4.6% during 2010-2015. The equivalent consumption of ethylene is estimated to have been 38.82 million tons in 2016, an increase of 3.4% over the previous year. Judging from conditions in 2016, the growth of equivalent consumption of ethylene is still driven mainly by the growth of polyethylene (PE) output and ethylene glycol output. The growth of apparent consumption is estimated to have been 6.9% for PE and 2% for ethylene glycol in 2016.
Similar to ethylene, the growth of equivalent consumption for propylene in China has also slowed down since 2010 (see Figure 5). Equivalent consumption of propylene is estimated to have been 31.90 million tons in 2016, an increase of 5.3% over the previous year. The growth arose mainly from consuming more polypropylene (PP) and propylene oxide. Apparent consumption growth for PP in 2016 was 6.5%, and for propylene oxide it was 8.2%.
After completion of a 600 kt/a MTO project by Shenhua Group Corporation in 2010, more than 10 CTO and MTO units started production in China. By the end of 2016, the capacity to make olefins in MTO units reached around 9.60 million t/a. Despite the drastic cost reduction of naphtha-based ethylene caused by the low price of crude oil in 2016, CTO remains quite competitive.


Prospects for 2017

A 1.00 million t/a naphtha-based ethylene unit constructed by CNOOC and Shell Petrochemicals Co., Ltd. will start production in 2017. Shenhua Ningxia Coal Industry Group Co., Ltd. will also use naphtha produced in its CTL unit to operate a newly constructed 400 kt/a thermal cracking unit. All other new ethylene capacity will be in CTO units. New capacity to make ethylene in China in 2017 is expected to be nearly 3.10 million t/a (see Table 1).
Propylene will continue to develop rapidly in 2017 – much faster than ethylene. New propylene capacity in 2017 is expected to exceed 4.20 million t/a. Except for 500 kt/a developed by CNOOC and Shell Petrochemicals Co., Ltd. and 580 kt/a of Shenhua Ningxia Coal Industry Group Co., Ltd., all other new capacity this year will be in coal chemical units and PDH units. China’s propylene capacity is expected to reach 36.30 million t/a by the end of the year. Propylene capacity in coal chemical units will exceed 7.00 million t/a, and the capacity in PDH units will exceed 6.00 million t/a.
The equivalent demand for ethylene in China can easily reach 40.10 million tons in 2017. In the consumption structure, the proportion will be 60.4% in making PE, 23.1% in making ethylene glycol, 5.3% in making PVC and 6.6% in making styrene.
The equivalent demand of propylene in China can easily reach 33.90 million tons in 2017: 72% of the propylene consumed will go into making PP, 8.3% into making acrylonitrile, 9.1% into making propylene oxide and 7.8% into making butanol/octanol. The markets for polypropylene and propylene oxide will develop rapidly in the future and their proportions in the equivalent consumption structure of propylene will become higher than in 2016.
China’s ethylene self-sufficiency was still below 60% in 2016. Its propylene self-sufficiency reached 73%. It is expected that ethylene self-sufficiency will grow to 62% in 2017, and propylene self-sufficiency will rise faster, reaching 90%. The drastic expansion of olefin capacity will surely drive an increase of output for products downstream products. Competition in China among the makers of polyolefins and related organic raw materials will be fiercer in the future.

Table 1   Major plans for new ethylene capacity, 2017

Company    Capacity (kt/a)    Process    Production start
Shenhua Ningxia Coal Industry Group Co., Ltd.    400    Naphtha    Q2 2017
Jiangsu Funde Energy & Chemistry Development Co., Ltd.    175    MTO    Q2 2017
Zhongtian Hechuang Energy Co., Ltd.    350    CTO    Q2 2016
Jiangsu Sailboat Petrochemical Co., Ltd.    300    MTO    Q3 2017
Jiutai Energy Group    300    CTO    Q3 2017
CNOOC    1 000    Naphtha    Q4 2017
Qinghai Damei Coal Industry Co., Ltd.    300    CTO    Q4 2017
Qinghai Mining Group Co., Ltd.    270    CTO    Q4 2017
Total    3 095