China PX trade pattern has changed under the new capacity expansion cycle
Click:0    DateTime:May.12,2023

By MiDuo, Fu Mingxia, PetroChina Jilin Petrochemical Co., Ltd.

Paraxylene (PX), as a key hub connecting oil refining and chemical industry, is not only one of the most important products in aromatics, but also a leading raw material in polyester industry.

With the commissioning of domestic refining and chemical integration projects, its dependence on foreign countries has continued to decline, and the situation of "private increases and state-owned decreases" has become increasingly clear. In the future, industrial clustering, large-scale equipment, and integration of refining and chemical industry will become the keynote of the industry development.

Refining and chemical integration enterprises become the main force of new production capacity

From 2018 to 2022, the supply of PX in China kept in short supply, and in the early stage, the supply had slow growth due to the restriction of market access and the pressure of construction return cycle, causing deepening imbalance between supply and demand. Since 2019, China's refining and chemical integration enterprises have become the main force for the release of new production capacity. In 2022, the domestic PX production capacity reached 36.83 million t/a, with high concentration of production capacity.

The change trend of domestic PX production capacity from 2018 to 2022 is shown in Figure 1. In terms of regional distribution, the PX production capacity is mainly distributed in Zhejiang Province, Liaoning Province, Fujian Province, and Shandong Province, four regions accounting for 72.5% of the total capacity; In terms of enterprise distribution, Zhejiang Petrochemical Co., Ltd., Hengli Petrochemical Co., Ltd., Sinopec and Shenghong Refining & Chemical Co., Ltd. are the main suppliers of PX, accounting for 65.5% of the total capacity. In terms of the nature of enterprises, it shows a situation of "private increases and state-owned decreases". The proportion of private enterprises has increased to 66.3%, having more and more prominent competitive advantages. The situation of domestic PX production unit in 2022 is shown in Table 1.

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Figure 1 The change trend of domestic PX production capacity from 2018 to 2022

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In the next few years, "industrial clustering, large-scale equipment, and the integration of refining and chemical" will become the keynote of the development of China PX industry. It is planned that the production capacity under construction (capacity expansion) will reach 9.5 million t/a, of which there are 2 enterprises with a scale of more than 2 million t/a. The new production capacity will be mainly distributed in East China, South China and Northeast China, and the trend of integrated development of upstream and downstream products will be further manifested. The new production capacity will be mainly launched in 2023. In the long run, PX is still a product with high import dependence due to its high access. Table 2 shows the details of new PX production capacity in China in the future.

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From 2018 to 2022, the output of China's PX increased by leaps and bounds. In 2018, the output of PX was only 10.23 million t/a, and with the launch of large refining and chemical projects such as Hengli Petrochemical Co., Ltd., Zhejiang Petrochemical Co., Ltd., and Shenghong Refining & Chemical Co., Ltd., the output of PX reached 24.75 million t/a in 2022. With the release of new production capacity and the growth of demand, the compound growth rate of output was 21.79% in the past five years. The operating rate in 2019 dropped to the lowest at 65.22%, mainly because the newly-added capacity totaled 8.33 million t/a and the start-up of new units was unstable, and part of units were mainly put into operation in the fourth quarter, all of which reduced the utilization rate of overall capacity. In 2020, the new capacity of PX was only 3 million t/a, so the operating rate increased to more than 80%. In 2021, there were more units for routine maintenance, and the output of Zhejiang Petrochemical Co., Ltd. new equipment was not released as scheduled, so the operating rate dropped to 68.38%. In 2022, the new PX units were put into operation at the end of the year, but due to the acceptable profits, domestic enterprises were more willing to start operations, so the overall operation rate was 67.2%. China's PX output and capacity utilization rate from 2018 to 2022 are shown in Figure 2.

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Figure 2 China's PX output and capacity utilization rate from 2018 to 2022

In recent years, China's PX self-sufficiency has been effectively improved, having a strong impact on the source of imported goods, and the import dependence has dropped to 30.89%. In 2023, with the commissioning of several new units, China's PX will continue its rapid development process and the domestic output is expected to exceed 32.5 million tons, and the import volume is expected to continue to decline.

The supply and demand of China’s PX from 2018 to 2022 is shown in Table 3. In the past five years, the supply of PX in China was in short supply. In 2018, due to strict requirements on assets, anti-risk ability and process technology, and the relatively high access of PX projects, the production capacity was in slow release and the effective output capacity was low. However, the demand has increased significantly driven by the rapid development of the polyester industry. As a result, the imbalance between supply and demand of PX in China was deepened. 2019 is a watershed year when large private refining and chemical projects was launched intensively and the production capacity of PX increased dramatically under the favorable national policy and the layout of seven major refining and chemical bases, leading to the escalating competition between home-made goods and imported goods, and the market gap has gradually narrowed and the import dependence has decreased year by year.

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The demand for PX is relatively simple, most of which are used for the production of purified terephthalic acid (PTA), and a very small amount is used for p-toluic acid, etc. P-toluic acid is an important intermediate of medicine, pesticide, photosensitive material and dyestuff. The main downstream of PTA is polyester industry which can be processed to clothing, beverage bottles, etc. They are close to people's livelihood, so the consumption of PX has positive correlation with GDP.

In 2022, China's PX consumption was about 35.247 million tons, of which PTA consumption was 34.8975 million tons, accounting for 99%; p-toluic acid and other consumption was 352 500 tons, accounting for 1%.

In 2023, the downstream PTA field is expected to have 14.5 million t/a new production capacity, which will drive downstream consumption to rise to 40.96 million t/a. The main factors affecting the changes in the supply and demand pattern are: the supply gap in the domestic market will be filled due to the launch of Zhejiang Petrochemical Co., Ltd. Phase II; The increased demand is mainly due to the effective release of 8.3 millon t/a PTA capacity from Zhejiang Yisheng New Materials Co., Ltd., DongyingWeilian Chemical Co., Ltd., and Tongkun Group Co., Ltd. (Nantong); The supporting development model of the whole industrial chain in domestic, refining-aromatics-polyester, has effectively reduced the dependence on imported goods, and the import volume has been significantly reduced.

The annual price in 2022 was in inverted V shape

In 2022, China’s PX price fluctuated greatly. The lowest price occurred in January, RMB6 445 per ton; the highest price appeared in June, RMB11 531 per ton, and the price difference was RMB5 086 per ton. The annual price was in inverted V shape. In the first half of the year, it showed a fluctuating upward trend, and in the second half, it showed a fluctuating downward trend. China’s PX price trend in 2022 is shown in Figure 3.

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                                                                                           Data source: ChemSino

Figure 3 China's PX price trend in 2022

Generally, the cost support in the post-market is still strong, and the contradiction between supply and demand in the PX-PTA market is not prominent. During the Spring Festival holiday in the first quarter, market transactions slowed down, and price fluctuations were limited. It is expected that in the first quarter of 2023, the overall PX market will stabilize first and then rise, the absolute price will still change with cost, and the price fluctuation will go range-bound at RMB7 000-8 500 per ton.

Four reasons lead to changes in import and export

In 2022, China imported 10.5824 million tons of PX and exported 84 600 tons. The import and export of China PX in 2022 is shown in Table 4.

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China is a major producer of PTA. PX, as the most direct raw material in the production process of PTA, is always in short supply in the domestic market, so a large number of goods are needed importing to meet the demand of downstream PTA production. However, since PX entered the capacity expansion cycle in 2019, China's PX dependence on foreign countries has begun to decline significantly, from the previous highest annual import volume of 15.9 million tons to about 12.57 million tons in 2021. The total import volume in 2022 was 10.5824 million tons, achieving a further decline.

With the large-scale capacity expansion of China's PX, the domestic market is becoming more and more saturated, market competition intensifies, and the trade pattern will also change. Domestic units lacking downstream PTA/PET supporting units will face export pressure, and small-scale units will also face the impact of large-scale units at home and abroad. Therefore, China's PX production enterprises should eliminate small-scale, high-cost and old units, and large-scale groups should concentrate their resources on large-scale units with advanced technology, strengthen the coordination and linkage of the industrial chain, improve the matching degree of upstream and downstream industries, so as to form a competitive force and enhance profitability.