China’s calcium carbide industry to make headway in 2023
Click:0    DateTime:Mar.29,2023

By Jiang Shunping, China Calcium Carbide Industry Association

Subdued downstream markets and high feedstock costs imposed heavier pressure on producers in terms of operation and production in 2022, which caused more losses. According to rough statistics of China Calcium Carbide Industry Association (hereinafter referred to as "the Association"), there were 116 calcium carbide producers in 2022, with a capacity of 39 million t/a in total, and their output was estimated at about 29 million tons, marking a slight year-on-year decrease. The net added capacity was 500 000 t/a, with 1.16 million tons added and 660 000 tons eliminated.

1. Price trend

The prices of calcium carbide continued to decline throughout the year, especially from the third quarter. The highest price was seen at RMB4 500/ton in the first quarter and the lowest level at RMB3 350/ton. The average sales price of calcium carbide was at RMB3 925.8/ton from January to November, down by 83% year on year.

2. Feedstock prices

The rising of coal prices gave rise to higher prices of semi-coke – a raw material used for calcium carbide in 2022. From January to November 2022, the average price of semi-coke was at RMB1 682/ton, up by 18% from the same period of the previous year. The prices of other raw materials also increased. According to rough statistics, mainstream electricity (comprehensive electricity) prices reached RMB0.50-0.53/kWh, up by about 10% year on year. The prices in some regions such as Henan and Hunan increased by 40% over the same period of last year. The average price of electrode paste (ex-works price) was RMB6 400/ton, up by 30% from the same period of last year. The prices of limestone saw a year-on-year increase of 30% due to restricted exploitation on the back of environmental protection policies. At the same time, out-of-demand quality limestone will be one of the important factors determining the industry in the future.

3. Supply and demand of polyvinyl chloride (PVC)

According to the statistics of China Chlor-Alkali Industry Association, there were 71 Chinese PVC producers in 2022, with a total capacity of 28.1 million t/a, of which, calcium carbide-based capacity accounted for 77%. The net added capacity was 970 000 t/a (660 000 t/a of calcium carbide-based capacity), with 1.12 million tons added and 150 000 tons eliminated. The output was estimated at 21.7 million tons through the year, down by one percentage point year on year. The operating rates reached 77%. The total PVC export volume was estimated to reach 1.98 million tons during the year.

Chinese PVC prices decreased in 2022 amid a mix of factors such as weakened downstream demand, high inventory and hampered export. By the end of November, the average transaction price of ethylene-based PVC was RMB6 148/ton, and that of calcium carbide-based PVC was at RMB5 940/ton, down by 36% and 35% respectively from the highest point of the year.

There will be 1.94 million t/a new PVC capacity in 2023, including 800 000 t/a calcium carbide-based. There will be 2.9 million t/a in 2024 and onwards, including 400 000 t/a calcium carbide-based. In terms of the grades to be expanded, new ethylene-based PVC projects will be put into production in the next two years, such as Zhejiang Zhenyang’s 300 000 t/a ethylene-based PVC project, and Wanhua Chemical (Fujian)’s 400 000 t/a PVC project matched with a large amount of by-product hydrogen chloride from its MDI/TDI plant. With the increasing capacity of ethylene-based PVC, the PVC supply structure in China will see some change.

4. 1,4-butanediol and polyvinyl alcohol (PVA) market overview

(1) 1,4-butanediol

Domestic prices of 1,4-butanediol fell continuously in 2022, from the highest price of RMB30 250/ton at the beginning of the year to the lowest price of RMB9 250/ton in November, marking a loss of 69%, the biggest in the past three years.

There were more than 20 major 1,4-butanediol producers in China in 2022, with a total capacity of 2.85 million t/a, and the output was estimated at about 1.9 million tons. According to the data of the China Petroleum and Chemical Industry Federation, the existing capacity, the capacity under construction and the capacity to be built in China totals 27.868 million t/a, including 4.163 million t/a under construction. Excluding the capacity to be built, the total capacity will exceed 6.5 million t/a in the next three years. The capacity of PBAT will exceed 21 million t/a in total, with the existing capacity at 516 000 t/a, the capacity under construction at 3.85 million t/a, and the capacity to be built at 17 million t/a.

It is estimated that the consumption of 1,4-butanediol will not exceed 5 million tons by 2030. In that way, 80% of the total capacity, if the projects of 1,4-butanediol and PBAT under construction and to be built are completed, combined with the existing capacity, is expected to be surplus.

(2) PVA

According to the statistics of the Association, there were 10 main PVA producers in 2022, with a total capacity of about 1.09 million t/a, and more than 70% of them adopted calcium carbide - acetylene process. The output was estimated at 700 000 tons in 2022, with a year-on-year increase of 6.06%.

The prices of its downstream product vinyl acetate stood high, with the highest seen at RMB16 200/ton in July and the lowest seen at RMB7 800/ton in December. According to rough calculation, PVA producers without matched vinyl acetate units, lost RMB4 000-6 000/ton during February-July, as the production costs were higher than sales prices. They regained profits from August because of decreased vinyl acetate prices.

5. Supply and demand of lime nitrogen and derivatives

According to incomplete statistics of the Association, there were about 21 lime nitrogen producers in China in 2022, with a total capacity of 2.04 million t/a and an estimated output of 1.1 million tons. The prices of lime nitrogen were largely maintained at RMB3 600-3 800/ton. There were about 12 dicyandiamide producers with a total capacity of 324 000 t/a. There were about 14 mono-cyandiamide producers with a total capacity of 252 000 t/a.

6. Profits

The prices of raw materials used for calcium carbide remained elevated as a result of lofty raw coal prices in 2022. According to the statistics of the Association, the cost of calcium carbide marked a year-on-year increase of 20% in 2022, and the average sales price decreased by 17% compared with 2021. Except for some profits or breakeven in the first quarter, the industry was in the red in other quarters especially at the end of the third quarter. According to preliminary estimates, the whole profits decreased as much as 117.54%  compared with 2021. If financial expenses, equipment depreciation and production of some producers without matched downstream units are calculated, the loss of calcium carbide per ton will reach RMB200-300/ton.

Opportunities and challenges brought by policies

1. Influence of policies and standards on the calcium carbide industry

First, the National Development and Reform Commission (NDRC) published the Implementation Guide for Energy-Saving and Carbon-Reducing Transformation and Upgrading in the Petrochemical Industry (2021 Edition) (referred to as the Implementation Guide), which is significant for promoting the green, low-carbon, safe and high-quality development of calcium carbide industry in a stable and orderly manner.

The energy efficiency standard level per unit product of calcium carbide is 805 kg standard coal/ton, and the benchmark level is 940 kg standard coal/ton. By the end of 2021, the capacity with energy efficiency close to the standard level was 1.41 million t/a, accounting for 3.6% of the total capacity. The capacity with energy efficiency lower than the benchmark level accounted for about 20% of the total capacity.

The Implementation Guide specified that by 2025, the proportion of capacity of calcium carbide with energy efficiency higher than the standard level should take up 30%, and the proportion of capacity lower than the benchmark level should be zero, so that the overall effect of energy saving and carbon reduction will be significant, the industry concentration will speed up, the comprehensive utilization of resources will be significantly optimized, and the clean production level will be significantly improved. The Guide also pointed out specific directions for energy conservation and carbon reduction in the calcium carbide industry, by providing detailed technical guidance on green process, comprehensive utilization and waste heat utilization.

At the same time, the Guide required new projects to make equivalent or decrement replacement, promoted the orderly withdrawal of independent calcium carbide producers with capacity of 100 000 t/a and below from the market by 2025, and accelerated the disposal of idled capacity. According to the statistics of the Association, there is about 3.5-4 million t/a capacity being shut for long time, and the total capacity of producers with 100 000 t/a and below is still as high as 1.2 million t/a. 

Secondly, the forthcoming "Specifications for Calcium Carbide Industry", edited by the Ministry of Industry and Information Technology, will lead and promote the transformation and upgrading, healthy development, energy conservation and consumption reduction in the calcium carbide industry. It will also put forward stricter requirements for the development of calcium carbide industry.

Thirdly, the Emission Standard of Air Pollutants for Lime and Calcium Carbide Industry (GB 41618-2022) was officially published. At the same time, "Energy Consumption Quota per Unit Product of Calcium Carbide" (GB21343-2015) is being revised by the Association and is expected to be released sometime in 2023.

2.With the start-up of new or technologically-upgraded projects, the tightening environmental protection and safety policies, the epidemic situation and the slowdown in domestic economy amid the pandemic, China's calcium carbide industry is still facing big challenges in the future, but there will be also good opportunities

First, according to the Central Economic Conference, the economic work in 2023 should adhere to the principle of “seeking for progress while maintaining stability”, carry out active fiscal policy and prudent monetary policy continuously, strengthen macro policy regulation, reinforce coordination among various policies, and form a joint force for higher-quality development. 

Secondly, China's PVC industry will continue to develop steadily, which will give strong support to calcium carbide consumption. Domestic PVC industry has been increasing in recent years. According to the statistics of China Chlor-Alkali Industry Association, there will be 3 million t/a PVC capacity put into operation in 2022-2023, of which, the capacity of calcium carbide-based PVC will account for 50%. Therefore, the demand for calcium carbide will strengthen further in the future.

Thirdly, domestic 1,4-butanediol industry will be a new growth consumption point in the calcium carbide industry. According to the statistics of the New Materials Special Committee of China Petrochemical Federation, 4.16 million t/a new calcium carbide-based 1,4-butanediol capacity will be gradually put into production in the recent three years as driven by downstream industries such as degradable plastics, spandex and electric vehicles, and the demand for calcium carbide will reach 5 million tons by then.

Other derivatives markets have limited influence on calcium carbide demand due to their small capacity base. However, with the recovering domestic economy, the demand for calcium carbide from polyvinyl alcohol and lime nitrogen is increasing.

Fourthly, producers adhering to circular economy become more competitive following the continuous improvement of the supply side. In recent years, producers have been in de-capacity in line with the adjustment of calcium carbide industrial policy and environmental protection policy. Internal combustion carbide furnace, as well as small calcium carbide furnace that cannot meet the standards in terms of energy consumption and environmental protection, have been gradually driven out of the market. In the future, with the continuous transformation and upgrading of the calcium carbide industry, the capacity and market share will be falling into leading producers who are close to energy resources, are along the circular industrial chain and are technically and financially advantageous. Therefore, the leading producers will become more competitive.

At the same time, a scaled circular economy model has been established among large domestic PVA, 1,4-butanediol and PVC producers. By constructing calcium carbide and derivatives projects, they have built an integrated coal chemical industry chain so as to increase product added value as well as reduce comprehensive energy consumption and environmental protection costs.

Fifth, the industry will face severe challenges in the future. The energy structure will face great changes in the future. The demand for traditional energy is decreasing sharply while the demand for clean energy will grow rapidly. It is predicted that the proportion of non-fossil energy consumption in China will increase from about 15% to 25% by 2030. The change in energy structure may force the industrial structure to make adjustment.

Green and low carbon concept brings new challenges to the industry. In 2021, the carbon dioxide emissions were about 65 million tons in the calcium carbide industry, accounting for 6.6% of the total emissions in the petrochemical and chemical industry. The severe pressure of carbon emission reduction will challenge the industry much in terms of cost and technology. At the same time, the dual control of energy consumption and energy intensity is restricting the development of the industry. Producers should make more efforts to implement energy conservation and carbon reduction in the future.

The continuous start-ups of new projects will bring more impact to the already oversupplied market. According to the statistics of the Association, there will be 16 projects put into operation during 2023-2024, with a total capacity of 5.5 million t/a, including 4.9 million t/a matched with downstream units and 600 000 t/a without downstream units. There will be 5.4 million t/a in the medium and long term, 4.9 million t/a of which is matched with downstream units.

Market outlook

To sum up, after deducting PVC and 1,4-butanediol projects newly put into operation in the past two years that 80% of them are matched with calcium carbide units, only about 1.5 million t/a of calcium carbide will be needed. After deducting the capacity of 1.2 million t/a from producers with capacity less than 100 000 t/a and below, the supply and demand of calcium carbide has met the requirements. 

However, with the steady growth of China's total economic aggregate and the healthy development of real estate market, the demand for calcium carbide’s derivatives such as PVC, PVA, 1,4-butanediol and lime nitrogen will increase steadily. Since China is short of oil resources and relatively rich in coal resources, the calcium carbide industry will still play an irreplaceable role in meeting downstream demand. Therefore, in the future, there will be upward momentum for the development of calcium carbide industry in the future.

In a nutshell, China's calcium carbide market has been stable in recent years, with big existing capacity and promising construction projects. There will be huge room for the future development. It is predicted that China's calcium carbide economy will face certain pressure and headwinds in the first quarter of 2023, and will make adjustment slowly. From the second quarter, the industry will improve gradually. The overall forecast will be better in 2023 than in 2022.