By Li Tong, Sublime China Information (SCI)
The continuous signing and ground-breaking of big projects in South China indicate that the pivot of China's chemical industry is shifting southward in line with the changes in population and economic consumption center. Although the Bohai Sea Region, led by Shandong and Liaoning, will remain as a major production area of maleic anhydride in China, South China will have much more market presence in terms of both supply and demand of maleic anhydride, and hence the distribution of capacity between the north and south will tend to be balanced.
A maleic anhydride mega-project settled in Fujian
On May 24, a signing ceremony was held in Fuzhou for Fujian Zhongjing Petrochemical Co., Ltd. to introduce UK-based Johnson Matthey’s BDO technology that has the worldwide largest capacity of 900 000 t/a into the hydrogen energy utilization and C4 industry chain. The C4 industry chain of this project mainly consists of several sub- projects –a 1.5 million t/a n-butane unit, a 1.2 million t/a maleic anhydride unit, a 900 000 t/a BDO unit, a 300 000 t/a tetrahydrofuran unit, a 300 000 t/a polytetrahydrofuran unit, a 100 000 t/a spandex unit, a 600 000 t/a PBT unit, a 600 000 t/a PBAT unit, and a 300 000 t/a butyrolactone unit. The products can be used in the production of lithium batteries, high-end fabric spandex, fully degradable plastics, etc. The investments in the project are estimated at RMB18 billion and the annual output value is scheduled to be over RMB60 billion. The project will be constructed in three phases and will be fully completed and put into operation within three years.
Zhongjing Petrochemical can effectively reduce production cost by achieving green and circular development of C3 and C4 industry chains post the completion of this project. The cost of C3 industry chain is expected to decrease by about RMB2.5 billion per year, which indicates remarkable economic and social benefits.
The industrial pivot is moving southward in light of waning driving force from resources
Compared with typical petrochemical production areas such as Shandong and Jiangsu, Fujian is not rich in oil and gas resources. However, the settling news of Zhongjing Petrochemical's C4 industry chain mega-project in Fujian indicates that the site selection of maleic anhydride projects is gradually turning from resource-driven to consumption orientation-driven. This is mainly because the continuous upgrading of production processes results in the diversification of sources of raw materials, and the focus of domestic consumption is changing.
On one hand, the methods of obtaining raw materials have a significant influence on the regional distribution of maleic anhydride capacity, but such influence is waning. The regional capacity distribution of maleic anhydride, led bybenzene-based maleic anhydride, was mainly resource-oriented before the n-butane process was commercialized in 2013. Areas rich with coal coking resources were favored by maleic anhydride producers at that time, so the maleic anhydride capacity in North China, represented by Shanxi and Hebei, even accounted for around 50% of China's total maleic anhydride capacity.
However, with the rise of the n-butane oxidation process, Shandong outperformed by virtue of abundant oil and gas resources and it became the biggest province in China in terms of maleic anhydride capacity and output. At the end of 2022, the maleic anhydride capacity in Shandong alone accounted for 40% of China's total. In recent years, however, the rapid development of LPG deep processing industry, represented by maleic anhydride and propylene, has caused increasingly tightening supply of domestic light hydrocarbon raw materials in China. So forth, the importing of cargoes, especially those from the Middle East and North America, is becoming more and more important. Chemical producers who are close to coastal ports prefer to import LPG raw materials to develop deep processing products. In this context, maleic anhydride producers are increasingly inclined to locate their capacity around ports of coastal areas. About 90% of the proposed maleic anhydride projects will be settled in coastal areas from Liaoning in the north to Hainan in the south in the coming five years.
On the other hand, the changing consumers’ focus is ushering in the southward movement of the industrial layout. With the rise of the n-butane process for its advantages in both raw material and consumer segments, East China, represented by Shandong and Jiangsu, is increasingly gaining ground. The spending power is strong for real estate, automobile and other commodity due to big population and well-developed economy, while the supply of raw materials such as LPG butane, and styrene is sufficient because of a big number of refining and chemical producers and traders. Therefore, more than half of the domestic producers of maleic anhydride and downstream unsaturated resins, organic acids, and tetrahydrophthalic anhydride have been settled in the region, with both supply and demand accounting for over 60% of the total.
With the constant southward shift of consumption and population in recent years, the demand for chemical products in South China is increasingly stronger. In the meanwhile, given the higher proportion of imported light hydrocarbon raw materials, major domestic petrochemical projects are less dependent on domestic upstream sources, and instead, they are attaching importance to well-developed coastal areas in South China, such as Guangdong, Guangxi and Fujian. In South China, Guangdong Huizhou Yuxin New Material’s 150 000 t/a maleic anhydride project was put into production, as well as Fujian Xinyang Technology, Guangdong Chenbao Composite Materials, and Guangxi Hualong Group’s unsaturated resin projects broke ground in 2022 alone. Huizhou Juhui Environmental Protection Material’s tetrahydrophthalic anhydride project in Guangdong was put into operation in the end of May, 2023, and Fujian Huicheng New Material’s tetrahydrophthalic anhydride project will break ground in the second half of the year. The increasing number of maleic anhydride, unsaturated resin, and tetrahydrophthalic anhydride producers is driving up supply and demand in South China (see Figure 1 and Figure 2), which has changed the history of producers’ dependency on cross-regional purchase of raw materials, thereby effectively reducing their costs of buying raw materials.
Figure 1 Regional maleic anhydride production shares, 2021 and 2022
Figure 2 Regional maleic anhydride consumption shares, 2021 and 2022
The capacity distribution between the north and the south will become more balanced
It becomes more and more obvious that the pivot of China's chemical industry will be moving southward according to the regional distribution of the proposed capacity of maleic anhydride in China in the next five years. The capacity distribution of maleic anhydride and derivatives will continue to expand around two developed coastal areas - East China and South China, so as to be closer to the end-user consumer market in the future. From the perspective of regional distribution of the proposed maleic anhydride capacity in China, the proportion in South China will reach 34%, second only to 38% in East China (see Figure 3). By province, Shandong still ranks first (see Figure 4), while Fujian ranks second with a proportion of 20% due to its sudden prominence. From the perspective of the distribution between the north and south, the distribution in the north is smaller than that in the south, with the former accounting for 47% and the latter 53%. Such landscape is aligned with the current Chinese economy, population distribution and future development trend.
Figure 3 Distribution of proposed China's maleic anhydride capacity in the future by region
Figure 4 Distribution of proposed China's maleic anhydride capacity in the future by province
Most of the proposed projects will be integrated with derivatives - BDO and succinic acid, so if they are put into production, the supply-demand balance in the maleic anhydride industry will change significantly. Although the Bohai Sea Region, led by Shandong and Liaoning, will remain as a major production area of maleic anhydride in China, South China will have much more market presence in terms of both supply and demand of maleic anhydride, and hence the proportion of capacity distribution between the north and south will tend to be at 50:50.In the inland regions with limited oil and gas resources, the sources of raw materials supply will continue to restrict the regional growth. Despite the rapid economic development in Chengdu, Chongqing and the middle reach of the Yangtze River, there are only sporadic construction plans of maleic anhydride and downstream projects due to a big gap between the regions and coastal areas in terms of the supply volume and cost of upstream light hydrocarbon raw materials, and the capacity of a single project will be largely restricted to below 100 000 t/a.
