By Li Tong, SCI

Wide downstream applications

Maleic anhydride (MA) is an important basic chemical raw material and intermediate and finds wide applications. The main application is to synthesize unsaturated polyester resin (UPR) as one of the main raw materials to produce reinforced glass fiber composite products, such as corrosion-resistant equipment in the industrial field, cooling towers, and wind turbine blades in the new energy field. It can also be used in the production of food additives such as tartaric acid, malic acid, tetrahydrophthalic anhydride and other epoxy curing agents, paper treatment agents in the paper industry, alkyd and acrylic resin coatings in the coating industry, and pesticide production malathion, as well as ashless dispersant in lubricant additives. Succinic acid, one of the main raw materials of polybutylene succinate (PBS) degradable bioplastic products, which has attracted much attention this year, is also one of the downstream products of MA.

N-butane oxidation becomes the main production method

   The production process of MA can be divided into benzene oxidation and n-butane oxidation, based on major raw materials.
   Benzene oxidation is the traditional MA production process, using hydro-coking benzene or coking benzene as raw material. The process has a long history, low investment costs and it is mature and reliable. China is rich in coking coal, thus enabling rapid development of the benzene oxidation process since it was introduced domestically. The process once became the leading production method in China before 2010 but has gradually been replaced by the emerging n-butane oxidation process, as it caused great environmental pollution.  
   N-butane oxidation has completely replaced the benzene oxidation process in the US and major European countries and has become the leading route for MA production, because of its advantages of low feedstock costs, limited environmental protection and large by-product steam. In China, the n-butane oxidation process has also developed rapidly as the domestic C4 resources have become increasingly abundant since the development of China's petroleum refining industry in the 21st century.
   Domestic n-butane-based MA capacity was released in succession after 2012. By 2020, the total capacity in China based on the n-butane oxidation route has reached 930 kt/a, and more are expected in the near term. Domestic MA capacity based on the benzene oxidation process is currently below 300 kt/a due to long-lasting negative margins, environmental pressure and phased-out capacities. 
   China has formed a core MA industry cluster, centering on Shandong, Jiangsu, Henan, Zhejiang and Guangdong, with 21 MA producers in 2020. Of them, eight producers operate benzene oxidation plants, mainly represented by Jiangsu Changzhou New Solar Technology, Shijiazhuang Bailong Chemical and 14 owns n-butane oxidation units, including Shandong Qixiang Tengda, Sinopec Yizhen Chemical & Fiber and Ningbo Jiangning Chemical. Shandong Qixiang Tengda is the largest domestic MA producer, with 200 kt/a n-butane oxidation MA capacity. 

Prices fluctuate upwards

   The domestic MA market shrugged off its weakness in the first quarter of 2020 and regained steam in the second quarter before hitting the year-to-date peak in the third quarter, with only a marginal decline see in late July and end-September. Figure 1 shows domestic MA prices in 2020. The prices generally fluctuated upwards in the third quarter and the growth accelerated sharply around mid/late August before topping the RMB10 000/t in mid/late September, up by RMB3 000-3 500/t.

Figure 1 MA prices in major domestic markets in 2020

   Major drivers behind the price rise include decreased spot availability due to more plants’ maintenance and stable downstream demand during the traditional peak season. Raw materials markets were relatively weak in the third quarter amid the bearish crude oil, hence imposing little impact on the domestic MA market. But the soft prices of major raw materials, hydro-coking benzene and n-butane left ample margins for MA.

Margins close to record highs

   Average theoretical margins of n-butane-based MA hit RMB2 018/t in the third quarter of 2020, surging by 131.16% from the second quarter and by 127.77% year on year, while those of hydro-coking benzene based MA reached RMB2 303/t, soaring by 217.22% from the second quarter and by 120.04% year on year. The margin for benzene oxidation process once rose close to RMB4 900/t and that for n-butane route was up to RMB5 000/t. Figure 2 shows the margin comparison between benzene and n-butane oxidation process in 2013-2020.

Figure 2 Margin comparison between benzene and n-butane oxidation process in China during 2013-2020

Better supply-demand fundamentals

   The outbreak of public health emergencies dealt a hard blow on the domestic MA market in the first two quarters of 2020. With concerns over the pandemic being eased in China, domestic MA supply and demand both increased year on year in the third quarter and displayed a much better performance than the same period of previous years. After September, Luoyang Jiuyuan Petrochemical and Changzhou New Solar Technology completed trial run at their new projects and began normal products sales.
   The average run rate of domestic MA plants stood at 49.32% in the third quarter of 2020, up by 1.4 percentage points from the second quarter and by 5.32 percentage points year on year. Domestic MA output reached 249.1 kt, up by 3.4% from the second quarter and by 7.65% year on year. The average operating rate of domestic UPR plants was at 38.71% over the same period, up by 1.09 percentage points from the second quarter and by 1.09 percentage points year on year. Domestic UPR output rose to 527 kt in the third quarter, up by 3.52% from the second quarter and by 16.36% year on year.

Hard to repeat the Q3 glory

   The price upturn in the third quarter was mainly because of temporarily tight supply and stable demand-side support. Looking forward, the two major supporting factors are waning. The previous supply shortages have been easing as producers recovered production after earlier maintenance. Domestic MA supply is expected to increase in the last quarter. On the demand front, domestic UPR producers continued to ramp up production in October, due to the traditional peak season. But afterwards, North and east China will launch stricter air pollution control measures in autumn and winter, which may weigh on UPR production. The domestic MA market is unlikely to repeat the third quarter glory in the fourth quarter, with major data expected to drop dramatically.