By Shi Litong, Sublime China Information
The Capacity of 200 000 t/a will be gradually launched, followed by the reshuffle of top 5 production enterprises
Since the end of July 2023, several major projects involving China’s maleic anhydride have been launched, with maleic anhydride by n-butane oxidation capacity of 200 000 t/a from Puyang Shengyuan Energy Science and Technology Co., Ltd. introduced into the market. Additionally, the annual capacity of maleic anhydride by n-butane oxidation equipment reached 280 000 t/a based on original capacity of 80 000 t/a. And China’s top 5 maleic anhydride production enterprises are shown in Table 1.
The supply of domestic maleic anhydride changed due to yearly capacity of 200 000 t/a invested into the market from Puyang Shengyuan Energy Science and Technology Co., Ltd. On one side, the capacity center shifted to the north again. Henan province’s maleic anhydride capacity proportion, increasing 10.10 percentage points from 2022, will arrive at 18.02% totally with above 200 000 t/a put into production, which indicated that Henan province would surpass Jiangsu and Guangdong provinces and become the second-largest maleic anhydride producer, next only to Shandong province (see Pic 1). And it also highlighted that the industry competition in East, Central and North China would be fiercer. On the other side, market concentration kept going up. Seen from CR5 data measuring market concentration, the CR5 of China’s maleic anhydride production enterprises had reached 63.79% as of August 2023 with the above 200 000 t/a all put into production, up 9.86 percentage points from 2022 and doubling 31.92 percentage points from a decade earlier (see Pic 2).
Note: Statistics date as of August in 2023
Picture 1 The capacity comparison of maleic anhydride in each province from 2022 to 2023
Picture 2 The CR5 concentration trend of China’s maleic anhydride enterprises within a decade
Process iteration and competition upgrade market concentration
Over the last decade, the fast development in market concentration of China’s maleic anhydride has been as a result of industry reshuffle driven by process driven by process iterations and competition. Subsequently, the number of enterprises shrank and the capacity increased.
Regarding process iterations, the capacity of domestic benzene-based maleic anhydride has been withdrawing from market due to deficit and environment protection, with most of production equipment from small and medium-sized enterprises dismantled or transformed to produce phthalic anhydride, leaving only a few pieces of equipment. And as for industry competition without process competition, periodic products in China’s maleic anhydride industry have gone through 5 strong and weak cycles since 2014. Even if normal production enterprises producing maleic anhydride by n-butane oxidation have long been in deficit, some of them also left market for uncompetitive operation, capacity and geography.
Comparing the data, 35 maleic anhydride enterprises with an average capacity of 50 100 t/a were in China in 2014. And 24 enterprises produced maleic anhydride by n-butane oxidation, with the capacity making up 70.12% totally, and the leading company is Tianjin Zhonghe Chemical Co., Ltd. with a capacity of 160 000 t/a. As of August 2023, the number of maleic anhydride manufacturers in China has been reduced to 24 and only 18 of them has produced maleic anhydride by n-butane oxidation, with average capacity increasing to about 74 000 t/a. If only calculate the manufacturers of maleic anhydride by n-butane oxidation, the average capacity was about 85 600 t/a. Only 7 manufacturers remained for benzene-based maleic anhydride and basically suspended production, with the capacity holding only 13.29% of the total. And the leading company, with a capacity of 400 000 t/a, is Zibo Qixiang Tengda Chemical Co., Ltd.
Much room for future market concentration to increase
Domestic maleic anhydride has been in overcapacity since 2022, as the downstream demand slowed down. Maximizing the strength to deal with market competition, and carrying out forward and backward integration have become the common choice for most of enterprises. And large-scale and integrated development have been the primary trend of China’s maleic anhydride industry. So based on that, the market concentration of China’s maleic anhydride can still be improved, with the capacity of 260 000 t/a definitely to be launched in the second half of 2023, and maleic anhydride CR5 reaching 70% by the end of 2023.
On the other hand, maleic anhydride is expected to be produced in large scale within the next 5 years (see Table 2). Reshuffling leading production enterprises will increase pressure on small and medium-sized plants with a capacity of less than 100 000 t/a. As of August 2023, 38 projects of maleic anhydride holding a total capacity of 8 250 000 t/a, with an average of 217 000 t/a, were scheduled to be completed in the next five years. Among them, 32 projects have a capacity of more than 100 000 t/a, accounting for the majority of 84.21%, 6 projects with less 100 000 t/a, occupying only 15.79%. Due to insufficient competitiveness, these small projects are difficult to enter the market, some of which have been put on hold.
Batches of large-scale production enterprises into the market will undoubtedly have a long-term impact on the industry. On the one hand, the threshold for mainstream enterprises might be increased to 200 000 t/a, or 300 000 t/a. And the market influence of individual leading companies will be weakened. On the other hand, small and medium-sized production companies with insufficient competitiveness will have greater risks of delisting when facing the low cost and full industry chain of large-scale production enterprises, and the concentration of the maleic anhydride industry will keep rising during this reshuffle process.
