JLC Coal Chemical Team
The year 2021, as the opening of China's 14th Five-Year Plan period, saw overall economy at home and abroad recovering from COVID-19, with released market demands. However, problems like higher commodity prices and inflation appeared. The coal chemical industry, as China's traditional chemical route, was obviously cost-driven in 2021, coupled with environmental protection and double control policies, leaving coal chemical products prices increased and profits limited.
Crude benzene
Crude benzene is one of the by-products of coal coking process, and its output usually takes 1% of coke output, being short for a long time. Due to COVID-19 in 2020, some new crude benzene capacities were delayed being launched in 2021. Driven by record high profits, coking enterprises were active in running the units, however, the crude benzene supply was still impacted due to the production restriction on environmental factors. The average operating rate of coking enterprises was lower than that of 2020, dropping to 71.5%. As the crude benzene supply shortage continues, facing the cost pressure, downstream hydrogenated benzene industry once again suffered from loss.
With the further expansion of hydrogenated benzene capacity and the intensified competition in raw material procurement, the consumption structure of crude benzene in China has become homogeneous, with 97% of crude benzene applied to the production of hydrogenated benzene and the left 3% to coking benzene and other low-end solvents. This year, the output of crude benzene was slightly higher than that of hydrogenated benzene, and hence the tightness was somewhat relieved. At the meantime, the prices of crude benzene were decided by the hydrogenated benzene market.
The crude benzene capacity distribution in 2021 was same as usual. North China accounted for 38%, with Shanxi taking 23% and Hebei 15%; Northwest China 20%; Shandong 9%, East China (except for Shandong) 8%; Central China 12%; Northeast China 7%; and Southwest China 6%.
The commodities prices soared up in 2021, and the growth of certain period of time hit a historical high. Supported by crude oil and benzene, China’s crude benzene market had a 5-year high. In East China, the average price (Jan-Nov) was RMB5 324/ton, up by RMB2 410/ton over 2020, an increase of 82.7%. The gap between yearly high and low points reached RMB4 173/ton.
Although China’s coking industry is highly concentrated, the coking producers do not have the price discretion. The elimination of backward capacities has been effective in recent years, and the increase of outputs of coke and its by-products are limited, leaving the supply and demand back to be balanced. However, the growing new capacities will once again pull up the supply. Meanwhile, a differentiated peak production will be implemented as the operation restriction policy will differ according to locations, environmental protection devices and pollutant emissions. More new capacities will be put into production in the following two years, leading to a huge increase in crude benzene output. China's coking industry will develop to be more standardized, and industry upgrading is inevitable.
Hydrogenated benzene
China’s hydrogenated benzene market went up healthily in 2021 as supported by domestic downstream expansion and global economy recovery. North China market was especially boosted by concentrated downstream expansion, and the hydrogenated benzene saw quick fluctuations.
Hydrogenated benzene producers are mainly located in Shandong, East China and North China, and most of the downstream expansion projects are also situated in Shandong and its surrounding areas. So, Shandong Derun restarted its hydrogenated benzene unit, Ningxia Baofeng and Shanxi CHF expanded their hydrogenated benzene capacities, and the operating rates of hydrogenated benzene producers in Shandong, Shanxi and Hebei rose significantly. Shandong, with 24%, ranked No. 1 in total capacity, followed closely by Hebei and Shanxi. With the elimination of backward capacities and the launching of new projects, the effective utilization went up. After the new hydrogenated benzene capacities come on stream in Northwest China, its percentage in national total will increase accordingly.
China’s benzene products are mainly petroleum routed. Statistics shows that new hydrogenated benzene capacities are Ningxia Tongde Aixin’s Phase II 100kt/a and Ningxia Tianyuan’s 150kt/a, with Henan Zhonghui New Energy Phase II in planning. Meanwhile, petroleum benzene capacities are also increasing, including newly launched projects of Shenghong Refinery and Zhenhai Refinery, and Yulong Island’s refining and chemical integration project, which is under construction. With the release of new capacities, the regionalization of benzene becomes more obvious. The share of petroleum benzene expands in East China and South China, while the hydrogenated benzene lines are mostly concentrated in Shandong, Hebei, Henan and Northwest and Northeast China. There are time differences in the commissioning of benzene capacities and its downstream capacities. Comprehensively, in 2022, benzene expansions are mostly located in Jiangsu, Zhejiang, Fujian, Guangzhou and the Northwest China, while its downstream capacities are concentrated in Shandong and Jiangsu. In Jiangsu and Zhejiang, the expansion of benzene and its downstream is synchronous, and the supply-demand and import volumes are able to be adjusted even if the benzene new capacities come on stream earlier than the downstream ones. However, in Shandong and Tianjin, styrene, phenol and acetone are expanding without any increase in petroleum benzene, giving hydrogenated benzene producers chances and rooms to negotiate the sales prices. Attentions still need to be paid to the prices and of downstream products and the profitability of the whole industry chain. After the downstream capacity expands, the price fluctuations will be bigger. And downstream product prices and downstream plant maintenance may have more impact on the negotiated prices of hydrogenated benzene, and even force the prices to go down.
Maleic anhydride
China's maleic anhydride market went up in the long run in 2021 and reached its historical high in late October. Given the slowed capacity expansion and increased demand, supply became short, giving sellers price discretion for the long term. Coupled with high prices of crude oil and related products, domestic units’ maintenance, improved demand and increased import prices, the market of maleic anhydride soared in 2021, with East China once reaching RMB12 000 /ton. However, right before Huizhou Yuxin launched its new capacities, the market plummeted under pressure.
The prospect of the maleic anhydride industry is still promising. On the supply side, there are many new projects, and according to incomplete statistics, more than 2.85 million t/a of new capacities will be launched by 2025, leaving the total figure exceeding 4 million t/a by then. The demand side will also see obvious changes. Thanks to the scaled expansion of degradable plastics, maleic anhydride-butanedioic acid-PBS class and maleic anhydride-BDO-PBS/PBAT integrated process will be gradually applied to production, resulting in a simultaneous expansion of maleic anhydride and its downstream.Qixiang Tengda, Huizhou Yuxin Chemical, Shenghong Refinery, Zhongjing PC are all planning to invest in such integration construction, and Anhui Sealong Biotechnology also has a medium integration project. Apart from that, Hengli PC plans to construct a PBS/PBAT project. The traditional derivative of maleic anhydride UPR will be squeezed. The diversified demand pushes up supply and brings confidence to the industry players.
However, with the expansion of capacities, the competition among suppliers might be fierce, squeezing traders’ negotiating rooms and leaving speculations difficult. The market prices will be also hard to remain high. Meanwhile, as the maleic anhydride benzene process does not have the cost advantage, the possibility of full withdrawal from the market in the future is very high. It is evident that small and medium-sized maleic anhydride producers do not have the ability to compete with integrated manufacturers, and they are hence possible to be merged or washed out from the industry.
