Aromatics: Demand Structure Changes and Dependency on Imports Remains
Year:2018 ISSUE:15
COLUMN:ORGANICS
Click:330    DateTime:Aug.07,2018


By Mi Duo, Research Institute of PetroChina Jilin PC


China’s markets of benzene, toluene and OX still depend on imports despite of the increasing self-sufficiency rate on the back of capacity expansion. As for OX, the capacity expansion pace is especially slow due to the requirement of high investment.

Capacity expansion continues

   1. Benzene

   In 2017, the production capacity of benzene continued to increase as refinery projects in Hebei and Shandong were successively put into operation. The additional benzene capacity reached 1.215 million tons. By the end of 2017, China had altogether 12.4 million t/a benzene capacity, among which Sinopec accounted for 36.9%, PetroChina 30.1%, and joint ventures, private enterprises and teapot companies 33.0%. More and more domestics and foreign capitals have been attracted to benzene industry.
   It is expected that China's new benzene capacity will reach 2.35 million t/a by 2018, and additional downstream capacities using benzene as feedstock will be 4.445 million t/a. Together with the imported cargos and hydrogenated benzene, benzene supply will be ample in 2018.

   2. Toluene

   There were 1.335 million tons of additional toluene capacity in 2017, and total domestic toluene capacity reached 12.732 million t/a by the end of the year. During the year, the capacity in East China accounted for 27.8% of the total, and South China 24.1%. With the launching of multiple sets of aromatics plants in South China, the expansion of toluene capacity has begun. It is expected that the local products will gradually replace the import ones in the future.

   3. OX

   Ortho-xylene is the raw material of phthalic anhydride and its application is relatively simple. China has 14 OX lines in 2017, with a total capacity of 1.597 million t/a and an annual output of 818 kt. At present, only 11 plants are in normal operation. The OX units of PetroChina Liaoyang Petrochemical, PetroChina Fushun Petrochemical, Fujian Dragon are all down. Sinopec Yangzi Petrochemical is the largest manufacturer with the capacity at 260 kt/a. In 2017, Sinopec's production capacity accounted for 50.1% of the total; PetroChina 17.3%; CNOOC 5.0%; and joint ventures and private enterprises 27.6%. No plans of new capacity are heard of for the next few years. The supply gap is large, and as the production route is complicated, most of the OX lines are owned by large petrochemical enterprises such as Sinopec and PetroChina. Private enterprises are usually not able to expand their OX capacities as held back by the long industrial chain and the large volume of investment.

Demand structure changes

   1. Benzene: imports are indispensable

   Driven by the robust downstream markets, the overall profitability of China's benzene industry remained good in 2017. The downstream expansion in recent years outpaces the expansion of benzene, and the import dependency thus gradually increases. In 2017, China’s benzene production was 8.386 million tons, the apparent demand 10.85 million tons and the import volume 2.503 million tons, leading to 23% import dependency, which was 7 percentage points higher than 2016. The expansion in styrene and caprolactam markets is the main reason for the increase in benzene imports. Styrene is still the largest consumer of benzene, followed by caprolactam and phenol. It is expected that the downstream demand for benzene will rise by 2.35 million tons in 2018. If the benzene supply will be 13.25 million tons and the demand 15.28 million tons, the supply gap will reach 2.03 million tons, and the estimated import volume will remain in the band of 2.2 million and 2.4 million tons.
   The imports are still one of the indispensable benzene supply sources. However, with the commissioning of teapot refineries and integrated refining projects, domestic supply will tend to be ample.

   2. Toluene: self-sufficiency as high as 93%

   Toluene is mostly used as a high-octane gasoline additive. It is also feedstock of making benzene and xylene. In 2017, China's toluene production was approximately 7.196 million tons, the import volume was 509 kt, the apparent consumption was 7.705 million tons, and the self-sufficiency rate was 93%. Due to the rapid growth of demand for PX, more toluene will be used for the production of benzene via disproportionation as well as the production of PX and toluene diisocyanate by deep processing. Non-aromatic solvents such as acetone, cyclohexanone, methyl ethyl ketone, and acetate will gradually replace toluene as solvents, so the consumption of toluene in the solvent field will gradually decline.
   Although the growth rate of domestic toluene capacity has slowed down, the capacity is still expected to continue to increase in the future. On the basis of the limited growth in the consumption sectors, the market will soon be saturated and thus the import volume will decrease.

   3. OX: demand declines due to the substitution of naphthalene

   Most of the OX are used for the production of phthalic anhydride, and the capacity of OX is far less than that of phthalic anhydride. In 2017, the output of OX in China was 818 kt, the import volume was 356 kt, and the apparent consumption was 1.174 million tons, a slight decrease from the previous year. Such decrease was mainly because many phthalic anhydride producers chose to substitute OX with naphthalene due to the cost-effectiveness advantage of the latter. In the context of increasing capacity and decreasing demand, OX import amount had been falling since 2012. However, the situation changed in 2017 as the imports gained 66 kt in 2017.