By China Chemical News Editorial Department

On June 28, the "2022 Petrochemical Industry Development Conference" opened online. At the conference, Sun Weishan, vice president of the China Petroleum and Chemical Industry Federation, released the "Early Warning Report on Production Capacity of Key Petrochemical Products".

Refining: China's refining capacity keeps improving

In 2021, China had a newly-added refining capacity of 36 million t/a, and several small refineries under 5 million t/a had been shut down.

In 2022, PetroChina Guangdong Petrochemical's 20 million t/a refining project will be completed and put into operation. By then, China's refining capacity will reach 910 million t/a. However, with the promotion and application of new energy vehicles in China, the refined oil market will be further oversupplied.

Basic petrochemical raw materials: amid the peak period of production, and the supply gap of some products has been narrowed

Ethylene: The production capacity in 2021 was 42.04 million t/a, a year-on-year increase of 21%. According to the progress of the projects under construction, China is expected to have 15.05 million t/a of newly-added production capacity in 2022. By then, the total production capacity of ethylene will reach 57.09 million t/a, a year-on-year increase of 36%. With the centralized production and release of new production capacity, the ethylene output will exceed 9 million tons if the operating rate reaches 85%, and the self-sufficiency is expected to increase to about 70%.

Propylene: In 2021, the production capacity exceeded 50 million t/a and reached 50.94 million t/a specifically, a year-on-year increase of 12.7%. According to the project progress, China is expected to have 8.81 million t/a of newly-added production capacity in 2022. By then, the total production capacity of propylene will reach 59.75 million t/a, a year-on-year increase of 17.3%. However, the average operating rate may continue to drop to around 80%, because the operating rate of propane dehydrogenation to propylene units was affected by excessive new production capacity and limited supply of propane raw materials. 

Ethylene glycol: The production capacity reached 20.81 million t/a in 2021, a year-on-year increase of 32.7%. According to incomplete statistics, there are 12 ethylene glycol projects (including 8 coal-to-ethylene glycol projects) will be put into operation in China in 2022, with a newly-added capacity of 4.35 million t/a. The total capacity will reach 25.16 million t/a, a year-on-year increase of 21%. With the gradual improvement of the upstream and downstream industrial chain of ethylene glycol, the industry will become more and more integrated. The supply and demand of China's ethylene glycol products have shown a steady increasing trend. However, the growth rate of supply is significantly higher than that of consumption, so the supply gap is expected to decrease by 2 million to 3 million tons. In the next 2 to 3 years, with the production of large refining and chemical projects and the increase of the operating rate, industry competition will become more intense, then the companies with weak competitiveness will be forced to withdraw.

Paraxylene (PX): The production capacity reached 31.59 million t/a in 2021, a year-on-year increase of 23.7%. According to the plan, there are 7 PX projects will be put into operation in 2022, with a newly-added capacity of 11.74 million t/a. The total production capacity will reach 43.33 million t/a, a year-on-year increase of 37%. Domestic production will replace imports, and supply shortages will be effectively alleviated. However, China's PX could have overcapacity risk in the next few years, because there are many new and proposed projects announced, and the growth rate of supply is significantly higher than that of demand.

Basic chemical raw materials: Through years of structural reform in supply side, and strict control in the growth of production capacity, the utilization rate has been at a relatively healthy level of development.

Caustic soda: The total production capacity was 45.08 million t/a in 2021, a year-on-year increase of 2.1%, among which the newly-added production capacity was 1.09 million t/a, and the withdraw of outdated production was 715 000 t/a. The output was 38.91 million tons, a year-on-year increase of 5.2%. The plant operating rate has maintained at around 80% since 2014, the operating rate in 2021 was 86%, an increase of 4.8 percentage points.

According to the plan, there are 8 caustic soda projects will be put into operation in 2022. The caustic soda production capacity will reach 46.32 million t/a, an increase of 2.8%. The operating rate will drop to about 82%.

Soda ash: The production capacity in 2021 was 32.39 million t/a, which has remained unchanged for three years. The output was 28.73 million t/a. The operating rate was 88.7% and it has remained above 85% since 2015. The apparent consumption continued to grow, reaching 28.21 million tons, an increase of 5% year-on-year.

It is estimated that China's soda ash production capacity will decrease by 1.1 million t/a to 31.29 million t/a in 2022, a decrease of 3.4%. The operating rate will be maintained around 88%.

Methanol: The production capacity in 2021 was 97.385 million tons, a year-on-year increase of 3.2%. The output was 78.16 million tons, a year-on-year increase of 17.7%. The average operating rate of the plant was 80.3%. The import volume was 11.218 million tons, a year-on-year decrease of 13.8%. The apparent consumption was 88.99 million tons, a year-on-year increase of 4.1%.

It is expected that China's methanol production capacity will exceed 100 million t/a in 2022, reaching 100.45 million t/a, an increase of 3.3%. Due to strong demand, the operating rate will be maintained around 80%.

Calcium carbide: The production capacity in 2021 was 38 million t/a, a year-on-year decrease of 2 million t/a. The output was 29 million tons, 120 000 tons more than in 2020. The operating rate was 76.3%, an increase of 4.1 percentage points year-on-year, and the production is still overcapacity.

It is expected that the calcium carbide production capacity will remain unchanged in 2022. The downstream demand for BDO and PVC will be strong, therefore the operating rate will be further increased.

1,4-Butanediol (BDO): 30 000 t/a production capacity was restarted in 2021, and the total production capacity reached 2.175 million t/a. The output was 1.82 million tons, a year-on-year increase of 16.7%. The operating rate was 83.7%, a year-on-year increase of 11 percentage points. The apparent consumption was 1.852 million tons, an increase of 18.8% year-on-year, in a state of tight balance.

It is estimated that there will be 480 000 t/a of newly-added production capacity in 2022, reaching 2.655 million t/a in total, an increase of 22%. There are 8.19 million t/a production capacity planned to be put into production in 2023 and 2024. The growth rate of production capacity is significantly greater than that of demand, then the production capacity will be oversupplied.

Titanium dioxide: The production capacity in 2021 was 4.487 million t/a, an increase of 11.2% year-on-year. The output was 3.79 million tons, an increase of 8.0% year-on-year. The apparent consumption was 2.67 million tons, an increase of 8.1% year-on-year. The operating rate fell 2.6 percentage points year-on-year to 84.5%, because the growth of demand is not as fast as the growth of production.

It is estimated that there will be 1.01 million t/a newly-added production capacity in 2022, reaching 5.49 million t/a in total, an increase of 22%. According to the downstream demand and import and export situation, the operating rate will be 75%, and the production capacity will be oversupplied.

Fertilizer industry: The prosperity has rebounded. The market supply and demand of nitrogen fertilizer are balanced. The overcapacity of phosphate fertilizer has been improved

Synthetic ammonia: The production capacity in 2021 was 64.88 million t/a, with a net withdrawal of 490 000 t/a. The output was 59.09 million tons, an increase of 0.4% year-on-year. The operating rate was 91%, an increase of 1 percentage point. The net import volume was 773 000 tons, and the apparent consumption was 59.865 million tons.

Urea: The production capacity in 2021 was 65.4 million t/a, with a net withdrawal of 460 000 t/a. The output was 55.63 million tons, down 1.1% year-on-year. The average operating rate was 85.1%, down 0.3 percentage points year-on-year. The net export volume was 5.25 million tons, and the apparent consumption was 50.38 million tons.

It is estimated that in 2022, China's urea will have a newly-added production capacity of 2.56 million t/a and reach 67.96 million t/a in total, an increase of 3.9%.

Phosphate fertilizer: The production capacity dropped to 21.41 million t/a, with a net withdrawal of 340 000 t/a in 2021 (converted to P2O5 pure, the same below). The output was 16.844 million tons, a year-on-year increase of 3.1%. The plant operating rate was 78.7%, a year-on-year increase of 3.5 percentage points. The net export volume was 3.785 million tons, a year-on-year increase of 49.6%. The apparent consumption was about 13.06 million tons, a year-on-year decrease of 5.5%.

Ammonium phosphate: The production capacity of mono-ammonium phosphate (MAP) was 7.946 million t/a in 2021. The operating rate was 77.3%, and the net export volume increased to 1.741 million tons, a year-on-year increase of 49.6%. The apparent consumption was 6.205 million tons, a year-on-year increase of 0.4%. The production capacity of diammonium phosphate (DAP) was 6.647 million t/a, a year-on-year decrease of 0.4%. The operating rate was 78.3%, an increase of 0.4%. The net export was 2.897 million tons, a year-on-year increase of 9.2%.

It is estimated that in 2022, China's ammonium phosphate production capacity will remain unchanged, and the supply will still exceed demand. More than 20% of the output of monoammonium phosphate (MAP) and more than 40% of the output of diammonium phosphate (DAP) will be produced for export.

Modern coal chemical industry: ushering in development opportunities, all the operating rate has improved to healthy level, except for coal-to-ethylene glycol.

Coal-to-liquids: There was no newly-added production capacity in 2021, and the total production capacity remained unchanged at 8.23 million t/a. The annual output was 6.795 million tons, an increase of 30.2% year-on-year. The operating rate was 82.6%, an increase of 19.2 percentage points compared with 2020.

The production capacity of coal-to-liquids is expected to remain unchanged in 2022.

Coal-based natural gas: The total production capacity reached 6.125 billion cubic meters per year including 1.02 billion cubic meters of newly-added capacity. The annual output was 4.453 billion cubic meters, a year-on-year decrease of 232 million cubic meters. The annual effective utilization rate was 83.1%, a year-on-year decreased of 8.6 percentage points.

The production capacity of coal-to-natural gas is expected to remain unchanged in 2022.

Coal (methanol) to olefins: There was no newly-added production capacity in 2021, and the total production capacity remained unchanged at 16.72 million t/a. The annual output was 15.752 million tons, an increase of 627 000 tons over 2020, an increase of 4.1%. The operating rate was 94.2%, an increase of 3.7 percentage points year on year.

In 2022, there are 3 new coal (methanol)-to-olefins projects planned to be put into operation, with an newly-added capacity of 1 million t/a. The total capacity will reach 17.72 million t/a by the end of 2022.

Coal (synthesis gas) to ethylene glycol: The total production capacity in 2021 reached 8.03 million t/a, an increase of 30.1%, including 1.86 million t/a of new production capacity. The annual output was 3.228 million tons, an increase of 226 000 tons compared with 2020. Due to the quality disparity in coal (synthesis gas) to ethylene glycol products, and many projects put into production in 2021, the operating rate of the industry dropped to 40.2%, a year-on-year decrease of 10.1 percentage points. As a consequence, China's ethylene glycol operated at a low level (less than 60%).

In 2022, there are 6 new coal (synthesis gas) to ethylene glycol projects planned to be put into operation, with an added production capacity of 4 million t/a. The total production capacity is expected to reach 12.03 million t/a by the end of 2022.

Synthetic resin: Polyolefin and polycarbon are at the peak of capacity expansion, and PVC is still overcapacity.

Polyethylene (PE): The polyolefin capacity increased by 20.9% to 28.36 million t/a in 2021. The output increased by 16.3% year-on-year to 23.287 million tons. The operating rate decreased by 3.2% to 82.1%, due to a large number of new production units. The supply gap narrowed 23% year-on-year to 14.08 million tons.

It is estimated that in 2022, China's PE production capacity will increase by 4.05 million t/a to 32.41 million t/a, an increase of 14.3%. Influenced by the restricted plastic order, the growth of domestic PE demand will be declined. There are a large number of new and proposed projects in the next few years, thus facing the pressure of structural oversupply.

Polypropylene (PP): The production capacity increased by 11.6% to 32.16 million t/a in 2021. The output increased by 13.4% year-on-year to 29.269 million tons. The plant operating rate increased by 0.4% year-on-year to 91%. The supply gap narrowed by 44.4% year-on-year to 3.41 million tons .

It is estimated that in 2022, China's PP capacity will increase by 5.15 million t/a to 37.31 million t/a, an increase of more than 16%. The main consumers of plastic products are already in excess, but injection molding products such as mall household appliances, daily necessities, toys, automobiles, food and medical packaging materials, still have steadily growing demand for PP, so the overall supply and demand will remain balanced. 

Polyvinyl chloride (PVC): The total production capacity was 27.13 million t/a in 2021, including 645 000 t/a of newly-added capacity and 160 000 t/a of withdrawn capacity, with a net increase of 485 000 t/a. The output was increased by 2.1% to 21.17 million tons. The operating rate was 78%, which was basically the same as 2020. The export volume increased by 179% year-on-year to 1.754 million tons, creating a new record high.

It is estimated that in 2022, China's PVC production capacity will increase by 1.2 million t/a to 28.33 million t/a, an increase of 4.4%, and the production capacity will remain slightly surplus.

Polycarbonate (PC): The production capacity increased by 26.7% year-on-year to 2.47 million t/a in 2021. The output increased by 18.2% year-on-year to 1.3 million tons. The plant operating rate decreased by 3.8% year-on-year to 52.6%. The supply gap decreased by 15.2% year-on-year.

It is estimated that in 2022, China's PC capacity will increase by 720 000 t/a to 3.19 million t/a, with a growth rate of about 29%. The absolute monopoly of foreign brands is gradually being broken, and the supply gap is constantly narrowing. However, the competition is fierce, and the operating rate is still relatively low. Therefore, it is difficult for enterprises to make profits.

Synthetic rubber: serious structural overcapacity

Styrene butadiene rubber (SBR): The supply and demand of SBR in China experienced a slow growth in recent years. The production capacity in 2021 was 1.75 million t/a, a year-on-year increase of 2.3%. The apparent consumption was 1.552 million tons, a year-on-year decrease of 0.7%. The plant operating rate was 72%, a year-on-year increase of 0.7 percentage points, which is basically the same as 2020. Emulsion polymerized butadiene styrene rubber (ESBR) had serious problem in homogenization competition, but some grades of solution polymerized styrene-butadiene rubber (SSBR) rely on imports. Net import volume in 2021 was 292 000 tons, a year-on-year decrease of 15%.

It is estimated that in 2022, the production capacity of China's styrene-butadiene rubber will increase by 120 000 t/a to 1.87 million t/a, an increase of 4.6%. Domestic demand will be relatively stable, and the production of new units will reduce the operating rate. Structural overcapacity will remain unchanged.

Butadiene rubber: The demand for butadiene rubber in China has been declining in recent years due to product substitution. In 2021, China's production capacity was 1.52 million t/a, a decrease of 10 000 t/a, a year-on-year decrease of 0.7%. The apparent consumption was 1.167 million tons, a year-on-year decrease of 11.8%. The plant operating rate was 70.4%, a year-on-year decrease of 2.1 percentage points. The total net import volume of neodymium-based butadiene rubber and low cis-butadiene rubber was 97 000 tons, a year-on-year decrease of 54.4%.

It is estimated that in 2022, China's butadiene rubber production capacity will increase by 190 000 t/a to 1.71 million t/a, an increase of 12.5%. The growth rate of supply is much greater than that of demand, which will further exacerbate overcapacity.

Polyurethanes: competitiveness improved, increased exports keep plant operating rates high

Methylenediphenyl diisocyanate (MDI): China's MDI supply and demand increased significantly in 2021, with a newly-added capacity of 550 000 t/a, and the total production capacity reached 380 000 t/a, a year-on-year increase of 16.5%. The output was 3.53 million tons, a year-on-year increase of 33.7%. The operating rate was 90.7%, an increase of 11.7% year-on-year. The net export volume was 767 000 tons, a year-on-year increase of 212%. The apparent consumption was 1.135 million tons, a year-on-year increase of 59.4%.

Toluene diisocyanate (TDI): China's TDI supply and demand grew slowly in 2021, with a newly-added capacity of 40 000 t/a, and the total production capacity reached 1.42 million t/a, a year-on-year increase of 2.9%. The output was 1.235 million tons, a year-on-year increase of 22.6%. The plant operating rate was 87%, an increase of 14%. The net export volume was 354 000 tons, a year-on-year increase of 61.4%. The apparent consumption was 881 200 tons, a year-on-year increase of 3.6%.

MDI and TDI production need complex technology, large investment in equipment, difficult process control and high technology monopoly. In 2022, there will be no new MDI and TDI projects put into production in China, and the production capacity will remain unchanged.

Lithium Iron Phosphate: Achieving rapid development, both supply and demand are growing rapidly.

Lithium iron phosphate is gradually gaining market recognition, with the advantages of high safety and long cycle life. It is currently in a stage of rapid development, with many new and proposed projects, rapid growth in demand, soaring costs, and rising market prices, all of which benefit from the rapid development of the new energy vehicle and energy storage industry, as well as the shortage in domestic supply.

In 2021, the total production capacity reached 712 000 t/a, a year-on-year increase of 96.7%, including 350 000 t/a of newly-added capacity. The output was 435 500 tons, a year-on-year increase of 212.1%. The plant operating rate was 61.2%, an increase of 22.6 percentage points. The apparent consumption was 435 800 tons, a year-on-year increase of 213%.

     It is estimated that in 2022, the new production capacity of lithium iron phosphate will reach 215 000 t/a, and the total production capacity will reach 927 000 t/a, a year-on-year increase of 30%. Taking into account practical factors such as terminal demand and raw material supply, the output will be about 650 000 tons in 2022, and the operating rate will be increased to about 70%. However, due to the large number of new and proposed projects, the growth rate of production exceeding that of demand in the same period, and the tight supply of raw material phosphate rock, China's lithium iron carbonate may be oversupplied in 2023.