Cui Xiaofei, OilChem China

Global ethylene production capacity in 2022 reached 239.86 million t/a, marking a year-on-year increase of 3.75%. The capacity was mainly distributed in Asia and North America, collectively accounting for more than 50% of the world's total capacity and followed by the Middle East (see Figure 1). The main production capacity in the above three regions was distributed in the United States, China and Saudi Arabia.

Figure 1 Global ethylene supply structure in 2022

At present, China has become the world's largest ethylene producer, with a market share of 18% and an average annual compound growth rate of 8%. China's international influence on the global ethylene trade flow has been on the rise from 2022 to 2023.

China, as the world's largest ethylene consumer, mainly imported ethylene from South Korea, Japan, the United States and the Middle East, of which South Korea accounts for about 60%. As the self-sufficiency rate of the Chinese market continues to increase, import dependence has also shown a downward trend year by year (see Figure 2).

Figure 2 Comparison of China’s ethylene import dependence from 2018 to 2022

Figure 3 shows the ethylene production capacity and production capacity growth rate in China from 2018 to 2023. Domestic production capacity maintained a steady growth in 2022. Currently, new units are primarily led by integration process, supplemented by light hydrocarbons process. Both the integration and light hydrocarbon cracking units in China are supported by supplementary facilities and made concentrated production (see Figure 4). The increasing scale of integrated units, along with the downstream extension of some units to terminal units, has significantly enhanced the completeness of the industrial chain. In 2023, there were five new ethylene units in the domestic market to be put into operation, namely Sinopec Hainan Petrochemical Co., Ltd., Guangdong Petrochemical Co., Ltd., Shandong Jinhai Chemical Co., Ltd., Ningxia Baofeng Energy Group Co., Ltd. Phase III and Sanjiang Chemicals Co., Ltd., collectively contributing to a production capacity increase to 50.84 million t/a.

    Figure 3 China’s ethylene production capacity and production capacity growth rate         from 2018 to 2023

Figure 4 The process of China’s ethylene production capacity in 2023

The distribution of domestic ethylene capacity remained relatively wide in 2022, mostly in East China, with a total capacity of 16.58 million t/a, accounting for 35.06% of the total; Northwest China, with a production capacity of 8.88 million t/a; Northeast China, with a production capacity of 7 million t/a, accounting for 14.80%; South China, with a production capacity of 6.96 million t/a, accounting for 14.72%; and Shandong Province, with a production capacity of 3.01 million t/a, accounting for 6.36%; the remaining regions accounted for smaller shares. The regional distribution of China's ethylene capacity in 2023 is shown in Figure 5. After the release of new production capacity in 2022, East China remained the main production region, with the most diversified production technologies, and the most complete chain of supporting downstream units.

Figure 5 Regional distribution of China’s ethylene production capacity in 2023

Currently, the process route of ethylene production in China is still dominated by naphtha cracking and supplemented by coal (methanol) to olefins (CTO/MTO). Light hydrocarbon cracking process accounts for the smallest proportion in overall. The naphtha cracking has a total production capacity of 32.6 million t/a, accounting for 68.94% of the total; the CTO/MTO possesses a production capacity of 8.31 million t/a, accounting for 17.57%; the light hydrocarbon cracking unit has a total capacity of 6.38 million t/a, accounting for 13.49%. CTO/MTO units belong to high-energy-consuming industries and are mostly concentrated in the Northwest China where transportation conditions are limited, which is not conducive for companies to equip suitable downstream industry chains, leading to less favorable economics for production companies. Consequently, the new capacity is mostly concentrated in naphtha cracking and light hydrocarbon cracking industries.

In terms of the distribution of China's ethylene production enterprises by nature in 2023, private enterprises took the lead, with a production capacity of 29.7 million t/a, accounting for 62.80% of the total; state-owned enterprises ranked the second, with a total of 24 manufacturers capable of producing 15.91 million t/a, accounting for 33.64% (see Figure 6).

Figure 6 Distribution of China’s ethylene enterprises by nature in 2023

There are many downstream industries of ethylene. From the perspective of the downstream consumption structure, large consumption is primarily attributed to polyethylene, ethylene glycol, ethylene oxide, styrene, etc. At present, polyethylene remains the most demanded product, accounting for 60.19%, a slight decrease compared to 2021, followed by ethylene oxide, ethylene glycol, and styrene, accounting for 10.85%, 9.31% and 8.60% respectively, all declining compared to 2021.

From 2018 to 2022, the consumption of China's ethylene had a trend of increasing year by year (see Figure 7). The growth is mainly concentrated in the PE and PVC industries, followed by the three traditional downstream industries: ethylene glycol, ethylene oxide, and styrene. Currently, China's big new ethylene projects will basically construct the aforementioned three industries as supporting units, leading to a steady increase in their proportions of downstream consumption from 2020 to 2021. However, entering 2022, their proportions declined, mainly due to poor profitability, and increased competition from other ethylene downstream areas that results from decreased capacity utilization. In recent years, the drawbacks of carbide-based PVC, such as high cost and high pollution, have become more evident, leading to a rapid development phase for the ethylene-based PVC industry. It is anticipated that the proportion of PVC in the downstream fields of ethylene will undergo a significant increase in the future.

   Figure 7 Comparison of the trend of annual ethylene consumption in China from 2018      to 2022

 From the consumption structure of China's regional ethylene, diverse downstream industries and intensive large-scale units make East China the region with the highest proportion of ethylene consumption in China, accounting for 29% of the total ethylene consumption (see Figure 8). The second is North China and Northeast China, both accounting for 17%. Their downstream distribution is mainly polyethylene, with greater demand for styrene and ethylene oxide. The third is the Northwest China, accounting for 16%, which mainly produces polyethylene. The fourth is South China, accounting for 14.00%, with main demand for polyethylene and ethylene oxide. The fifth is Central China and Southwest China, accounting for 4% and 3% respectively, with main demand for polyethylene. Throughout the year 2022, the proportion of downstream consumption in East China increased slightly year-on-year. This is mainly due to the fact that East China covers all downstream categories, and the production of the supporting equipment of the integrated units is also concentrated in East China. Therefore, China's main downstream production and sales areas of ethylene are both concentrated in East China.

Figure 8 The proportion of China’s ethylene consumption by region