By Guo Na, iBUYCHEM

Under the impact of the Covid-19, the upstream sectors influence the coating industry in two aspects: first, the stability of production scale affects the stability of raw material supply; second, the prices of raw materials affect the production cost of coatings. From the perspective of the domestic market, raw material prices were basically in a downward trend from January to April 2020 and rebounded sharply at the end of April with the support of the national policy of resuming production.
   From January to September 2020, China's coatings output totaled 17.5359 million tons; the cumulative main business income was RMB209.41 billion; and the total profit was RMB16.41 billion. Thanks to the recovery of the coatings industry and the tight supply, the prices of coating raw materials continued to rise in the third quarter, reaching the highest level of the year in mid-November.

Styrene

   At the beginning of 2020, demand for styrene was sluggish in China due to the pandemic, and the launching of new large-scale units resulted in an increase in supply and hence an imbalance between supply and demand. The spot prices dropped to a historical low of RMB4 300 /t on the back of plunge of crude oil. In April, after crude oil prices stabilized and downstream demand resumed, styrene prices began to fluctuate upward. In October, under the combined effects of cost, supply-demand, and capital, the market prices of styrene rocketed up by 67%. The market trend is shown in Chart 1.

Chart 1 China’s styrene prices, 2020

Titanium dioxide

   The titanium dioxide market declined and then picked up in 2020, and the overall performance was an upward trend. In the first quarter, the market performed strongly, and prices rose on the back of companies’ purchasing. In the second quarter, the prices fluctuated and fell. From the beginning of April to the end of June, the price dropped by nearly RMB2 000/t, with the biggest reason being the unbalanced supply-demand caused by the covid-19. Then prices were pushed up in September by the rising prices of upstream titanium ore, sulfuric acid, and sulfur and the increase in downstream output. The trend of the South China market is shown in Chart 2.

Chart 2 South China titanium dioxide prices, 2020

Ethylene glycol

   China’s ethylene glycol supply and demand ends have both been impacted by the coronavirus pandemic in 2020. Coupled with the successive decline in crude oil in the first quarter, the prices of ethylene glycol dropped to RMB2 870 /t, a historical low since 2008.
   The prices bottomed in the second quarter. The market was fluctuating in April and began to rebound in late May, with the stabilization of crude oil, the improvement of domestic public health situation, and the recovered downstream polyester demand. By the end of November, the market has been in a stage of adjustment. See Chart 3 for details.

Chart 3 China’s ethylene glycol prices, 2020

TDI

   At the beginning of 2020, affected by the coronavirus, TDI continued its downward trend in 2019, and hit a record low transaction price at the end of March. By the end of April, driven by the rebounded crude oil, limited production, and plants maintenance, TDI started to increase and gained RMB2 000 /t by early June. After Wanhua completed its maintenance and restarted the line, the market adjusted downward again in mid to late June. Then the supply at home and abroad both decreased and demand improved in July, and TDI prices thus began to rise and such trend lasted until October. As of the end of October, TDI prices went downward again.
   The change in supply and demand pattern is the main factor affecting the trend of TDI. At the end of 2018, Lianshi Chemical's 50 000 t/a plant and Wanhua Chemical’s 300 000 t/a line were put into operation, leaving domestic TDI capacity surge from 840 000 t/a to 1.19 million t/a, and hence starting a new round of TDI reshuffle era. No new capacities were put into production in 2019. While in 2020, Wanhua Fujian TDI project will be expanded from 100 000 t/a to 250 000 t/a, and the TDI capacity will rise to 1.34 million t/a. The market price trend is shown in Chart 4.

Chart 4 China’s TDI prices, 2020

MMA

   In the first half of 2020, the MMA market experienced ups and downs as in 2019. In mid-June, as acetone prices fell back after hitting a record high, and the downstream demand became weak, the domestic MMA prices went down. After the consolidation in the third quarter, driven by the increase in acetone prices, MMA prices rose again in the fourth quarter. The market price trend is shown in Chart 5.

Chart 5 China’s MMA market prices, 2020

   By October 2020, China’s MMA capacity reached 1.265 million t/a, and the output was 595 000 tons. In the next 3 to 5 years, the MMA capacity may continue to increase.

Acrylic acid

   The acrylic acid market continued decreasing in Q1 2020. By March 31, the mainstream acrylic acid prices in East China fell by RMB950/t from February 28, a MoM decrease of 14.07%. However, driven by factors such as rising crude oil, soaring propylene, and improving domestic demand, acrylic acid started to rebound in April. In May, the domestic acrylic acid market continued to rise on the back of production curtailment, hence reduced market supply, and increase in propylene market. In June, the acrylic acid market prices fell again and bottomed at the end of August. In September, driven by cost, line maintenance and traditional peak season, the prices of acrylic acid started to rise and lasted until mid-October. In late October, it began to weaken again and entered a consolidation period. The market trend is shown in Chart 6.

Chart 6 China’s acrylic acid market prices, 2020

   In 2019, the domestic acrylic acid production cost was RMB5 800 - 7 400 /t, the average price was RMB6 670 /t, and the average profit was RMB801 /t. By the end of November 2020, the average production cost of acrylic acid was RMB5 985 /t, which was 11.1% lower than the average production cost of RMB6 736 /t in the same period of 2019, and the average profit was RMB738 /t.

Butyl acrylate

   After the Spring Festival in 2020, logistics and transportation were restricted, shipments were blocked, inventory increased, production had to be cut or stopped, and the market was sharply declining. In April, driven by the increase in raw materials and certain downstream purchasing, the butyl acrylate prices increased. In June, the market showed a fluctuating downward trend and continued until the end of August. In September, driven by cost and unit maintenance, the prices began to rise, which lasted until mid-October. Afterwards, with the weakening of demand and cost support, the production began to reduce again in late October and the market started adjusting itself. The market trend is shown in Chart 7.

Chart 7 China’s butyl acrylate prices, 2020

n-Butanol

   Due to the impact of the Covid-19, n-butanol decreased in Q1 2020. However, in the second quarter, driven by the rising of crude oil, propylene, and acrylic acid, and the rebound in domestic demand, n-butanol market picked up. But after the rapid rise, the prices of n-butanol fell rapidly again. In May, downstream butyl acrylate producers began to purchase, and n-butanol prices started to fluctuate higher. Especially in the fourth quarter, driven by the increase of propylene and acrylic acid, the prices of n-butanol rose rapidly until November. The market trend is shown in Chart 8. 

Chart 8 China’s n-butanol prices, 2020