Cui Honglei from SCI

The linkage between the domestic and overseas 2-EH markets has strengthened since 2020. Global supply-demand changes have directly impacted 2-EH prices. Figure 1 shows the domestic 2-EH market trends in the recent decade. 

Figure 1 Domestic 2-EH Market Trends in Recent Decade

Supply growth slows down sharply

2-EH supply-demand saw slow changes in recent years. Mainland China accounts for around 40% of world 2-EH capacity, followed by other Asian regions and the US. 

In terms of global trade flow, China remains one of the few net 2-EH import regions. In 2021, global trade flow changed sharply. 2-EH plants in overseas countries and regions, such as South Korea, Europe and the US were shut for a long period of time in the first half of 2021. This triggered declines in China’s 2-EH imports and increases in exports. The situation improved slightly in the second half of the year. Based on China’s 2-EH import data in 2021, Asian countries and regions remained the major origins. 

Supply and demand continue to increase

China’s domestic 2-EH supply and demand continued to increase in the past five years. Major downstream industries include plasticizers and 2-ethylhexyl acrylate (2-EHA). Their sound demand growth, especially since 2020 boosted by the growing demand from the medical gloves and infrastructure sectors led to steady increases in downstream consumption. The growth in domestic 2-EH supply slowed down relatively and the oversupply situation eased year on year. Average capacity increase in the past five years was only 2.4%, far lower than the consumption growth of nearly 6% over the same period. This reflected that the domestic 2-EH supply-demand is rebalancing and the market is even shifting into short supply situation. 

Figure 2 shows domestic 2-EH capacity and output comparison in 2017-2021. Domestic capacity growth slowed down notably, with only one new unit at CNOOC Shell and Petrochemicals Company (CSPC) added in south China in 2018. Domestic 2-EH capacity was largely stable in 2021 as compared to 2020.  

Figure 2 China’s 2-EH Capacity and Output in 2017-2021

Domestic 2-EH designed capacity totalled 2 375 t/a in 2021, flat with 2020 and there were 15 2-EH producers. Most plants are swing plants, which may choose to either produce 2-EH or n-butanol (NBA) depending on margins. Given stagnant 2-EH capacity expansion and increasing consumption, 2-EH oversupply pressure has eased and margins have improved. In 2021, the 2-EH industry’s margins witnessed growth spurt and thus, most units switched to produce 2-EH. 

Most NBA/2-EH plants are not switchable when they were just started up. But in response to profit changes caused by supply-demand fluctuations, more and more plants were upgraded and reconstructed to become partially or completely switchable. Five NBA/2-EH plants in China can switch their production. For most of 2021, Nanjing Chengzhi and Hualu Hengsheng switched to produce 2-EH, while Luxi Chemical also switched for 2-EH production. Hence, effective 2-EH capacity was higher than the total designed capacity, which was all online in 2021. 

Domestic output to continue increasing

Domestic 2-EH output has been on the rise in recent five years, except in 2020, which saw unexpected slight declines. Slowing capacity expansion and improving margins bolstered 2-EH producers’ production enthusiasm, pushing up the overall run rate of the industry. Gross profits of the domestic 2-EH industry exceeded RMB6 000/ton in 2021. The lucrative profits led to higher operating rates at most domestic 2-EH plants. Meanwhile, some swing plants switched to produce 2-EH. As such, domestic 2-EH output set record highs at nearly 2 370 kt in 2021. 

Figure 3 shows China’s monthly 2-EH output in 2020-2021, which was high in early and the latter part of the period and low in the middle of the period. This is just in line with domestic 2-EH maintenance schedules. In the second and third quarters, major 2-EH plants including those at Qilu Petrochemical, Shandong Lanfan, Shandong Jianlan and Tianjin BohuaYongli were shut for a relatively long duration, causing dramatic falls in monthly 2-EH output over the period. The output peaked in January at 224 kt and bottomed in September at 164.2 kt in 2020, while 2-EH output in June-September 2021 was lower than the same period of 2020 and output in other months increased. 

Figure 3 China’s Monthly 2-EH Output in 2020-2021

2-EH industry to enter quicker expansion phase

     The year 2021 marked a turning point for the 2-EH industry. High margins provide huge development chances for the industry and capacity expansion will once again accelerate as the industry prosperity is rising significantly. Meanwhile, propylene and downstream industries are more preferred to purchase 2-EH. The gross margin of 2-EH rose to around 50% in 2021 and it became one of the high prosperity products in the propylene downstream sectors and has successfully attracted attention of a large number of capitals. Some propylene enterprises are also planning to build 2-EH plants. Statistics showed that the number of 2-EH units planned to be put into operation in next five years increases sharply, including Jiangsu Huachang and Wanhua Chemical. Additional 2-EH capacities may amount to 938 kt/a, which may open a new chapter for domestic 2-EH supply.