Si Mengying, JLC

China’s propylene industry has been expanding rapidly, so will the propane dehydrogenation (PDH). The competition has become fierce and the pressure on PDH will be heavy enough for the industry to cut the capacity, increase efficiency and optimize technologies. 

China’s propylene capacity over 50 million t/a

Chart 1 shows China’s propylene capacity trend from 2013 to 2022. By May 2022, the figure reached 53.47 million t/a, up by 5.78% over the end of 2021. The compound growth during 2013 to 2022 is 8.68%. Chart 2 indicates China’s propylene production routes’ proportion percentage in 2022.

Chart 1 China’s propylene capacity trend, 2013—2022

Chart 2 China's propylene routes’ percentage in 2022

China’s propylene capacities are located in 24 provinces, mainly in East China, North China, South China, Northwest China, and Northeast China. The production routes are also geographically distributed: Sinopec steam cracking + PDH + MTO in East China, teapot refineries catalytic cracking + PDH in North China, MTO in Northwest China, and big refinery project in South China. Major growths are from East China, South China and North China. 

Chart 3 China’s propylene capacities by regions in 2022

Propylene route structure changes and PDH expands

Coal chemical industry has been restricted by the carbon peak policy. The olefin industry development plan shows that both traditional petroleum routes (steam cracking and catalytic cracking) and coal/methanol-based projects have been reduced while the light hydrocarbon routes such as propane and mixed alkanes routed projects are booming with the advantages of simple reaction process, high product yield, small footprint, low investment, etc.

PDH project growth is only next to PetroChina, Sinopec, CNOOC, and big teapot refineries, reaching 5.92 million t/a by May 2022, taking 23% of the total capacity of propylene. There will be more and more PDH units, with over 35 million t/a under construction or in plan in the following 10 years. The growth will be over 20% if all these projects are launched as planned. 

Shandong has following PDH projects: Haiyi Chemical’s 250 thousand t/a, Xintai PC’s 300 thousand t/a, Wanda Tianhong’s 450 thousand t/a, Shandong Binhua’s 600 thousand t/a, as well as Jinhai Chemical’s light hydrocarbon project. East China has following PDH projects: Ningbo Formosa’s 600 thousand t/a, Jiangsu Hengrui’s 300 thousand t/a, Jiangsu Jiarui’s 450 thousand t/a, Yanchang Zhongran Chemical’s 600 thousand t/a, as well as Sanjiang Chemical’s light hydrocarbon project. South China has following PDH projects: Fujian Meide’s 660 thousand t/a, Dongguan Juzhengyuan’s 660 thousand t/a, Guoqiao Chemical’s 1 million t/a, Donghua Energy (Maoming)’s 600 thousand t/a X2, and Guangxi Qinzhou’s some PDH projects. 

RCEP took effect and Guangxi is expecting new PDH projects

Chart 4 presents China’s propylene capacity distribution by province in 2022, indicating that plants in South China are mostly located in Guangdong and Fujian, due to the presence of Sinopec and JV projects. Guangdong, with 4.173 million t/a, took 7.8% of the total capacity, while Fujian 2.51 million t/a and 4.69%. Guangxi, with few projects, accounted for only 0.92% of the total. However, with the implementation of RCEP and relying on the construction of the new western land and sea channel, Qinzhou Port Area of Guangxi Pilot Free Trade Zone has actively promoted multi-regional cooperation and made every effort to accelerate the construction of Beibu Gulf. Many petrochemical projects have been started in Qinzhou Port Area.

Chart 4 China’s propylene capacity distribution by province in 2022

The construction of Guangxi Huayi’s 750 thousand t/a PDH unit and its supporting equipment has started in April, with the building period from 2022 to 2023. According to Schedule of Progress for the Second Batch of Major Projects (Preliminary) to be Coordinated and Promoted at the Autonomous Region Level in 2022, Guangxi Huayi has another integrated project of 1 million t/a methanol to olefin and downstream deep processing, with the construction period from 2023 to 2025. Guangxi Tongkun Qinzhou Green Chemical Base’s Phase I chemical new material project includes 600 thousand t/a PDH, 400 thousand t/a PP and 300 thousand t/a PO, all being built through 2023 to 2025. 

Impacted by policies and profitability, coal projects in Northwest China and Northeast China have been reduced. PDH projects are moving to new regions with big progress. In 2020, Northwest China’s first MDH project was launched in Yan’an PC, and Northeast China’s first PDH construction started in Liaoning Baolai. In 2021, Northwest China’s first PDH project was launched in Ningxia Runfeng. Northeast China will see more PDH projects from Jinguotou and Liaoning Xianghui.

PDH explosive expansion restricts the boom

The explosive PDH growth in China has impacted the competition environment. 

The foreign companies have monopolized China’s PDH technology. Stable PDH lines in China are all using technologies from UOP and Lummus, namely Olefles and Catofin. As the feedstock sources are almost fixed, leaving costs at same level. The competition is on market. Early comers and scaled leading producers have stable buyers, and the only choice newcomers have is price war.  

Meanwhile, China’s PDH capacity will exceed 40 million t/a in the following 10 years, and the processing volume of propane will be 50 million t/a. However, China is still relying on propane imports due to the reasons of quantity and quality. The propane costs are therefore high. As feedstock cost takes 70% of PDH operation cost, PDH’s profitability depends on the prices of propane. As the price war is inevitable, PDH will face the pressure from both raw materials and downstream. 

The increasing demand for propane and the rising crude prices has pushed up the propane prices. Chart 5 shows China’s PDH profitability from 2021 to 2022. The gross profits fell to RMB561/ton in 2021, down by 67% YoY. Most of the units were at a loss in 2022. With the launch of new capacities and the fiercer competition in second half of 2022, the pressure on PDH industry will be heavier. 

Chart 5 China’s PDH profitability trend, 2021-2022

Technology optimization, hydrogen reuse and the enhancement of the comprehensive competitiveness of PDH projects

The huge pressure on PDH has brought up the awareness of energy cut, efficiency improvement and technology optimization, so as to strengthen PDH’s competitiveness and compensate for the disadvantages caused by the deterioration of the competitive environment. According to certain information, UOP’s new NG PDH process improved the feedstock selectivity, conversion rate and processing cost. Donghua Energy (Maoming) PDH unit will be equipped with this new NG PDH fluid bed route to gain some cost advantage. Zhejiang Yuanjin New Materials will also adopt UOP’s new process for its 750 thousand t/a PDH unit, with platinum-containing catalyst system based on alumina carrier. The low energy consumption and low emissions performance will enhance operational flexibility, runnability and reliability, with significant energy, environmental and cost advantages.

PetroChina and Sinopec have started their PDH industry allocations. Puyang Yuandong Technology’s 150 thousand t/a PDH unit is equipped with ADHO route from China University of Petroleum (East China)’s State Key Laboratory of Heavy Oil. Its non-toxic and non-corrosive non-precious metal oxide catalyst is environmentally friendly with independent intellectual property, and a highly efficient circulating fluidized bed reactor has been developed for it, which successfully realized the continuous dehydrogenation reaction and catalyst scorching regeneration. Hohhot PC’s 50 thousand t/a PDH project will be launched in Q3 of 2022. The producer’s catalytic cracking by-product propane supply can totally satisfy the demand from its PDH line. 

The reuse of hydrogen can also improve PDH competitive edge. China’s PDH capacities have about 200 thousand tons of hydrogen as byproduct every year, one of the largest by-product hydrogen resources among all chemical production routes. PDH producers have realized the necessity of hydrogen reuse. 

     However, given the active nature of hydrogen, high storage and transportation costs and undoability of long-distance transportation, most of the plants have utilized it with low added value, such as combustion for steam heat replenishment or for oil refining and steam cracking, with very few plants realized deeper utilization. Many PDH plants have started considering high value-added utilization of hydrogen, like building hydrogen refueling stations or developing hydrogen batteries and hydrogen vehicles. Given that China is promoting hydrogen energy vehicles, the growth of hydrogen energy demand will bring more opportunities for PDH companies and enhance the overall competitiveness of PDH projects.