By Xue Jiarui, Gong Yongqiang, ChemSino
Surging feedstock PX capacities, margins shifting to downstream industries
China’s para-xylene (PX) capacity reached around 13.5 million t/a by the end of 2018, while PX imports were 15.9 million tons and apparent consumption totalled 26.9 million tons. Its self-sufficiency rate of PX was only 41%.
Table 1 China’s major PX producers in 2018
Producers | Location | Capacity (kt/a) |
Zhongjin Chemical | Ningbo, Zhejiang | 1 600 |
Fuhaichuang Chemical | Zhangzhou, Fujian | 1 600 |
Fujia Dahua | Dalian, Liaoning | 1 400 |
Qingdao Lidong | Qingdao, Shandong | 1 000 |
Urumqi Petrochemical | Urumqi, Xinjiang | 1 000 |
Huizhou Refining and Chemical | Huizhou, Guangdong | 940 |
Shanghai Petrochemical | Shanghai | 840 |
Yangzi Petrochemical | Nanjing, Jiangsu | 850 |
Fujian Lianhe Chemical | Quanzhou, Fujian | 800 |
Liaoyang Petrochemical | Liaoyang, Liaoning | 770 |
Sichuan Petrochemical | Chengdu, Sichuan | 750 |
Jinling Petrochemical | Nanjing, Jiangsu | 700 |
ZRCC | Ningbo, Zhejiang | 650 |
Hainan Refining & Chemical | Danzhou, Hainan | 600 |
Tianjin Petrochemical | Tianjin | 390 |
Hengli Petrochemical started up its 4 500 kt/a PX plant after China’s Lunar New Year in 2019. Zhejiang Petrochemical announced in the second quarter the test run at its phase I project, which includes a 4 000 kt/a PX plant, expected to launch production within the year. Sinochem Hongrun, Hainan Refining & Chemical, Huizhou Refining & Chemical and Hengyi Brunei all have plans for trial run at their new plants in the second half of the year. Therefore, China’s PX capacity is likely to increase by at least 10 million t/a by the end of 2019, posting a growth rate of up to 80%. Details are shown in Table 2.
Table 2 China’s PX capacity additions in 2019 (partial)
Producers | Location | Capacity (kt/a) | Start-up time |
Hengli Petrochemical | Dalian, Liaoning | 4 500 | 2019 |
Zhejiang Petrochemical Phase I | Zhoushan, Zhejiang | 4 000 | 2019 |
Dongying Weilian Chemical Phase I | Dongying, Shandong | 1 000 | 2019 |
Hainan Refining & Chemical Phase II | Danzhou, Hainan | 1 000 | 2019 |
Huizhou Refining and & Chemical Phase II | Huizhou, Guangdong | 1 000 | 2019 |
Zhontai Kunyu New Materials | Korla, Xinjiang | 1 000 | 2019 |
Sinochem Hongrun Petrochemical | Weifang, Shandong | 800 | 2019 |
Liaoyang Petrochemical | Liaoyang, Liaoning | 230 | 2019 |
Expected booming capacity additions in 2019 may not lead to notable supply increases until 2020. News about impending start-up at Hengli Petrochemical has triggered a cliff-like fall in PX prices by nearly 30%. When supply is no longer a restriction, margins will shift to downstream industries. Chinese PTA producers will gain a stronger position in the whole industrial chain, through which, PX-PTA-PET industries will realize all-around and coordinated development.
Downstream PET industry enters into capacity expansion boom
China’s advancing of supply-side reform since 2017 has been improving the supply-demand structure of the domestic PET industry and boosting the industry development. China’s ban on plastic waste imports has been fuelling the demand for virgin PET. In 2017, China imported 2.20 million tons of PET wastes, accounting for 5% of domestic apparent consumption. PET capacity additions in China reached around 8 million t/a in 2017-2018, pushing up domestic PET capacity to 54 million t/a by the end of 2018 and output at around 46 million tons, which translated into around 40 million tons of PTA demand. Over 8 million tons of new PET products are expected to be available in the market during 2019-2020 and PTA demand will remain sound in the near term. Details are shown in Table 3.
Table 3 China’s PET capacity additions in 2019 (partial)
Producers | Capacity (kt/a) | Start-up time |
Nantong Hengli Hengke | 600 | 2019 |
Hainan Yisheng | 500 | 2019 |
Hengyi Haining | 500 | 2019 |
Yipeng Phases II | 500 | 2019 |
Tongkun Group Jiaxing Petrochemical | 300 | 2019 |
Tongkun Hengbang Phase IV | 300 | 2019 |
Tianlong New Materials | 250 | 2019 |
Hengyi Yijing Phase II | 250 | 2019 |
Shenghong Guowang Hi-tech | 200 | 2019 |
Hengyi Petrochemical | 200 | 2019 |
Fujian Jingwei | 200 | 2019 |
Yisheng Dahua | 200 | 2019 |
Zhejiang Hailide New Materials | 200 | 2019 |
Jiangsu Huaya Chemical Fiber | 200 | 2019 |
Jiangsu Jiangnan Chemical Fiber | 200 | 2019 |
The continuous progression of China’s supply-side reform has raised the concentration level of PET industry, which is poised for sound development after adjustment. In April 2019, China’s National Development and Reform Commission (NDRC) solicited public opinions over the “Guiding Catalogue for Industrial Structure Adjustment (2019 version), draft for comments”. Continuous polymerization plants and dimethyl terephthalate (DMT)-based PET plants, with capacity of below 200 kt/a would be restricted and 20 types of equipment and production lines which have been used for 30 years, as well as some old and backdated production processes and equipment would be eliminated, according to the Catalogue. This gives clear direction for the future development of the PET industry.
Limited new PTA capacities
The domestic PTA market faced an acute surplus supply in 2013-2015, due to vast capacity expansion and lack of feedstock. However, from 2016 onwards, limited new projects and more idled plants, including those at major PTA producers, Xianglu Petrochemical and Huabin Petrochemical, the former Far Eastern Petrochemical eased the oversupply situation. Since 2016, only Hanbang Petrochemical Phase II, Jiaxing Petrochemical and Sichuan Energy Industry Investment started up new PTA capacities, totalling 5.40 million t/a. The PTA industrial chain headed into healthy development after 2017, on the recovery of the downstream PET industry and the start-up of new feedstock PX plants.
Table 4 China’s major PTA producers in 2018
Producers | Location | Capacity (kt/a) |
Hengli Petrochemical | Dalian, Liaoning | 6 600 |
Fuhaichuang | Xiamen, Fujian | 6 150 |
Liaoning Yisheng Dahua | Dalian, Liaoning | 5 950 |
Zhejiang Yisheng Petrochemical | Ningbo, Zhejiang | 5 600 |
Tongkun Group | Jiaxing, Zhejiang | 4 200 |
Huabin Petrochemical | Shaoxing, Zhejiang | 3 200 |
Zhuhai BP | Zhuahai, Guangdong | 2 950 |
Hanbang Petrochemical | Wuxi, Jiangsu | 2 900 |
Hailun Petrochemical | Wuxi, Jiangsu | 2 400 |
Hainan Yisheng Petrochemical | Danzhou, Hainan | 2 000 |
Honggang Petrochemical | Lianyungang, Jiangsu | 1 500 |
Yangzi Petrochemical | Nanjing, Jiangsu | 1 350 |
Formosa Chemical & Fiber | Ningbo, Zhejiang | 1 200 |
Yizheng Chemical Fiber | Yizheng, Jiangsu | 1 000 |
Pengwei Petrochemical | Chongqing | 900 |
China’s PTA capacity was around 52 million t/a in 2018 and output at around 40 million tons. The industry will brace for a new round of capacity expansion peak in the second half of 2019 to 2020. Single-plant capacity will be larger and new energy-saving technologies will be applied. Xinjiang Zhongtai, Xinfengming Phase I and Hengli Petrochemical Phase IV all plan to conduct trail run at the end of 2019. Some capacity additions in 2019 are listed in Table 5.
Table 5 China’s PTA capacity additions in 2019 (partial)
Producers | Location | Capacity (kt/a) | Start-up time |
Sichuan Energy Investment Chemical | Nanchong, Sichuan | 1 000 | May 2019 |
Xinfengming Dushan Energy Phase I | Jiaxing, Zhejiang | 2 200 | September 2019 |
Zhongtai Group Kunyu New Materials | Korla, Xinjiang | 1 200 | October 2019 |
Hengli Petrochemical Phase IV | Dalian, Liaoning | 2 200 | End of 2019 |
Ningbo Zhongjin Petrochemical | Ningbo, Zhejiang | 3 300 | 2019-2020 |
Lanshan Tunhe Chemical | Hutubi, Xinjiang | 1 200 | 2019-2020 |
Baihong Petrochemical | Quanzhou, Fujian | 2 500 | 2020 |
Xinfengming Dushan Energy Phase II | Jiaxing, Zhejiang | 2 200 | 2020 |
Tongkun Group | Jiujiang, Jiangxi | 2 400 | 2021 |
Jiutai New Materials | Hohhot, Inner Mongolia | 1 800 | 2022 |
Increasing industry concentration level
Leading PET producers have been expanding their upstream plants since the approval of PX projects is decentralized. As for the oil refining sector, Hengli Petrochemical launched production at its 20 million-ton oil refining project. Zhejiang Petrochemical’s two-phase project, with capacities totalling 40 million t/a, and Rongsheng Petrochemical and Tongkun Petrochemical being joint-stock companies were put into trial run. Hengyi Brunei’s 15 million-ton and Shenghong Refining and Chemical’s 16 million-ton project are under construction. The launch of large-scale integrated refining and chemical projects in seven major industrial parks will integrate the whole production process of the crude oil-PX-PTA-PET-textiles industries.
Apart from expansion, PET giants are accelerating mergers and acquisitions and taking the opportunity to go public to enhance their own strength. In 2017-2019, Hengyi Petrochemical integrated 4 million t/a of PET capacities from eight companies through mergers and acquisitions. Rongsheng Petrochemical, Hengyi Petrochemical, Tongkun Group, Xinfengming, Hengli Petrochemical and Dongfang Shenghong all issued new shares on the A-share market or carried out back door listing. In the first half of 2019, Sanfangxiang announced its plan to acquire Jiangsu Hailun Petrochemical. Shenghong’s affiliated company intends for listing by borrowing the shell of Danhua Technology.
Futures escort spot cargoes
PTA futures is the first chemical futures listed in China, providing effective price reference for upstream and downstream companies and playing an import role in sound and stable development of the industrial chain. After nearly 12 years’ development, PTA futures market scale has been expanding. In November 2018, overseas traders were introduced to participate in China’s PTA futures trade.
China launched monoethylene glycol (MEG) futures in 2018. The two major PET feedstocks, PTA and MEG are likely to realize coordinated development. In June 2019, Zhengzhou Commodity Exchange (ZCE) issued “Announcement over the Collection of Polyester Staple Fiber (PSF) Futures Delivery Brand”, which means the preparation work of the listing of PSF futures has been put on the agenda. The launch of different types of futures along the PTA industrial chain will benefit its long-term sound development and better serve physical enterprises.