By Wang Ying, SINOPEC Tianjin
The compound growth rate of Chinese ethylene tar’s capacity was around 8.3% from 2017 to 2021. And from 2017 to 2019, the capacity of ethylene tar products stayed stable, whose growth is mainly around the years from 2020 to 2021. By the end of 2021, yearly capacity of Chinese ethylene tar products reached 3 186 200 tons, surging 9.38% compared with the last year. In 2021, with 3 new plants built up, 1 plant capacity expanding, the total capacity increased by 273 200 tons. The tendency of Chinese ethylene tar’s capacity is shown in Picture 1.
Pic 1 Tendency of Chinese ethylene tar’s capacity 2017-2021
The output tendency of Chinese ethylene tar is shown in Picture 2, of which the output in 2021 enjoyed the biggest increase, mainly attributable to a new plant, and 6 sets of equipment introduced, some of which started production. And due to limited output in that year, some production plannings had to be delayed to 2021 to carry out.
Pic 2 Tendency of Chinese ethylene tar’s output 2017-2021
In 2020, judging from start-up, the operation rate dropped significantly, which lies in a lot of equipment installed in 2020, but part of them started operation in the second half of the year. Therefore, the overall operation rate was held down in 2020. But due to the output increased by two new plants in the last two years, the growth of operation rate was encouraged.
As for the distribution of output, products of Chinese ethylene tar are concentrated (See Pic 3). Seeing from the capacity tendency of recent five years, East China has been the most concentrated area, as well as a relatively centralized area regarding new capacity.
Pic 3 Main production distribution areas of Chinese ethylene tar
By the end of 2021, capacity of ethylene tar products in East China reached up to 35.35%; Northeastern and Southern areas accounted for 18.53% and 15.85% respectively. And Northeastern and Southwest areas are the major output areas of ethylene tar.
According to the survey, from 2017 to 2021 the output of Chinese ethylene tar affected by light weight showed the tendency of falling initially, but was followed by an increase due to the launch of new plants. In 2021, three sets of ethylene tar equipment were introduced into China, and then the overall capacity has enhanced to 3 186 200 tons. By the end of 2021, domestic output of ethylene tar increased to 2 596 900 tons, 26.59% higher than that of 2020 (Table 1 shows more details).
Notes: Ethylene tar is the byproduct of ethylene cracking equipment, SINOPEC based on the planned volume to sign the sales contracts. And this product doesn’t have storage in initial and final production phases.
In 2021, fuel and carbon black ranked top 2 in downstream of China’s ethylene tar industry, accounting for 37% and 35% respectively, followed by the deep-processing industry occupying 25%. The downstream consumption of ethylene tar was mainly around the fuel, and marine fuel oil and burning oil still occupied the biggest market. This year, the limited demand of burning oil and marine fuel oil resulted in overall proportion decline of fuel. And the second biggest market is carbon black, whose demand increased this year (see Pic 4 for details).
Pic 4 Chinese ethylene tar consumption structure in 2021
Downstream demand forecast of Chinese ethylene tar for next 3 to 5 years
In 2022, product consumption of Chinese ethylene tar will show continuous growth momentum, and it is expected to surge around 300 000 tons compared with 2021. With the integration of industrial chain, more sets of carbon black equipment in the downstream market will be put into production. Through contrast analysis of capacity increase regarding downstream market and ethylene tar, in 2022 ethylene industry still faces tight supply, but the carbon black market in the downstream and deep-processing industry will enjoy the capacity increase.
Market prospect of ethylene tar
In 2022, the capacity and output of domestic ethylene tar products grew in pace with the launch of refining integrated equipment. And the output of ethylene tar products is expected to grow to 326 000 tons.
In 2021, products of ethylene tar were featured by tight supply, concentrated sources of material, and a high level-running market. In the next five years, capacity expansion of ethylene tar products is coming, and domestic capacity of ethylene tar products will have much growth. Especially after 2025, the tight supply will be improved noticeably. From 2022 to 2024, market prices of ethylene tar products are expected to enjoy an incremental tendency. Brent futures are expected to trade in a mainstream range of US$60 to US$75 from 2025 to 2026. And with much capacity expansion after 2025, the price of ethylene tar will decline year by year.
Ethylene tar industry analysis in macro-economy
On Oct 27, 2021, State Council Information Office released a white paper, titled "Responding to Climate Change: China’s Policies and Actions". China implemented a series of national strategies to actively respond to climate change, including intensify efforts in response to climate change, continue to update NDC targets, accelerating work on 1+N policies for peaking carbon emissions and achieving carbon neutrality, stay committed to a green and low-carbon development path to make coordinated efforts to reduce pollution and carbon emissions, and actively explore new, low-carbon models of development, tighten control over greenhouse gas emissions to control greenhouse gas emissions in key industries, promote green and low-carbon development in urban and rural construction to develop a green and low-carbon transportation system and enhance biological carbon sink capacity, give full play to the role of the market to promote the construction of a national carbon market system and establish a greenhouse gas voluntary emission reduction program, press ahead with major national strategies to improve climate resilience and increase support for addressing climate change.
The policy of carbon emissions peak and carbon neutrality was again mentioned in 2021, which is beneficial for deep-processing development of ethylene tar, as well as suppressing the demand of fuel area. With farsighted eyes, this policy has some driving forces on deep-processing of ethylene tar, but still limits the demand of light weight ethylene tar.