Raw materials in plasticizer industry
mainly include octanol and phthalic anhydride. In recent years, with new production
equipment for octanol, its capacity reached 2.106 million t/a in 2015. However,
the octanol industry is being trapped in overcapacity because the demand for
octanol in China was only about 1.73 million tonnes. Limited by the consumption
of DOP, it is predicted that the octanol market looks gloomy in the near
future.
Source: Baidu
As for phthalic anhydride, its capacity in
China reached 2.565 million t/a in 2015, ranking top one in the world. Currently,
the production lines of phthalic anhydride are not fully loaded in China. The
competition within phthalic anhydride industry is predicted to be more intense
because the industry has already been in overcapacity and the manufacturers are
stilling expanding their capacity.
Gloomy
future of octanol
-Slow
growth on octanol capacity
Since 2013, the growth China capacity of
octanol has been slowing down. In 2015, with the new 80,000 t/a octanol
capacity from Jiangsu Huachang Chemical Co. Ltd., the total octanol capacity
reached to 2.106 million t/a in China.
A part of the production lines got "put
aside' in 2014 while in 2015, those lines were almost fully loaded. With the restart
of octanol production lines from Sinopec Sichuan Petrochemical Company and China
Dongming Oriental Group, the total octanol production reached 1.53 million
tonnes in 2015, a record high in China.
The operation rate of octanol production
lines were only 60% in China in 2013. Limited by the high prices of raw
materials and low prices of products, the productions in many enterprises were
in deficit. Some production lines were even suspended. In 2015, the operation
rate reached to over 73% when the production lines could be fully operated.
In the development of octanol industry,
part of the octanol business of Sinopec Group had exited the octanol industry
in 2011; and the octanol capacity stopped increasing in four years. As for China
National Petroleum Corporation (CNPC), its butyl octanol business is developing
and thus the octanol capacity is increasing in the past few years.
Tianjin Bohai Chemical Industry Group Co.,
Ltd. has become the biggest octanol producer in China, followed by Sinopec Qilu
Petrochemical Company, Luxi Chemical Group Co., Ltd., and Shandong Jian Lan
Chemical Co., Ltd.
Due to too much new octanol production
equipment in the past few years, the profits dropped a lot. Some
plan-to-construct projects have even been cancelled.
It is predicted that the growth of octanol
capacity would slow down and it would reach 2.3 million – 2.5 million t/a in
2020 in China. Due to the overcapacity, few new capacities would be in the
market and the operation rate of octanol would remain around 70%.
-Source
of raw materials change structure of competition
Around the year 2010, the self-sufficiency
rate of octanol enterprises in China was about 50%-60%. With high profit, the enterprises
were very active in investing. The development of raw materials has broken the monopoly
by the two giants in China - Sinopec Group and CNPC, which gave more opportunities
to the investors.
Sinopec Group and CNPC have both adjusted
their butyl octanol business. Sinopec Group decided to exit the octanol
industry and to expand on n-butyl alcohol, while CNPC planned to have a more balance
development in its butyl octanol business.
The new capacities from the new players are
constructed very fast. With the development of its raw materials, the new butyl
octanol projects are no longer limited with only the pattern of buying propylene
to construct butyl octanol equipment.
In the construction of butyl octanol equipment in the past two years, integrative
development in the upstream has been popular with new players; at the same
times, downstream butyl octanol equipment projects for PDH projects and MTP
projects also appear, which would change the butyl octanol industry from the
sources of raw materials. Thus, led by the fluctuation of crude oil price in
the future, the changes of propylene would complicate the completion structure
of strubutanol and octanol.
In H2 2014, the cost of naphtha pyrolysis olefin
enjoyed great advantages in three raw materials. By Feb. 2016, the cost of naphtha
olefin was much lower than MTO which used imported methanol and PDH priced by
CP.
Due to the diversity of propylene, raw
material of butyl octanol, PDH and MTO projects would keep impacting on the butyl
octanol market. In term of competiveness, PDH project would enjoy great
advantages in short time while MTO project would get weaken.
The capacity of butyl octanol equipment in
single unit was about 250,000t/a. Considering the operating capital for
installing propylene and butyl octanol, it is estimated that the capital for
the butyl octanol equipment would cost RMB600-700 million with the interest of
about RMB35-40 million per year.
-Increasing
domestic capacity but increasing exporting volumes
The apparent consumption of octanol was
1.737 million tonnes in 2015, up 14.4% YoY, among it, the domestic output was
1.533 million tonnes, up 11.2% YoY. The self-sufficiency rate of octanol in
China has gone up to 81% in 2013 from 70% in 2012, increased to 90.8% in 2014
and stayed at 88.3% in 2015.
However, with the increasing domestic
capacity of octanol in China, the exporting volume was also increasing and the
import volume was decreasing. The total import volume was 219,000 tonnes
in 2015, up 13% YoY, while the net import volume was 204,000 tonnes.
The main reason why the net import
volume was increasing instead of decreasing is that the overseas suppliers were
not willing to give up the China market, and offered more discount. Moreover,
most of the octanol equipment was in maintenance in 2015 and the downstream
industries would fill up the octanol for overseas.
It is predicted that the output of octanol
in China would reach about 1.8 million tonnes in 2016, up 8% YoY; its net
import volume would be 100,000 tonnes in 2016, down 44% while apparent
consumption would be 1.85 million tonnes, up 4% YoY in 2016.
-Sluggish
downstream market
Octanol is mainly used to produce dioctyl
phthalate (DOP) in China. The apparent consumption of octanol was 1.737 million
tonnes in 2015. Based on the current capacity and total apparent demand, there
is no argue that octanol industry is in overcapacity.
Limited by the consumption of DOP, the
consumption of octanol would increase in a short time; however, in the future,
the growth rate of octanol consumption would decrease rapidly even if the
consumption of DOP doesn't decrease.
The speech of newly constructed capacity is
much faster than the growth of octanol market. Thus, the octanol market is
looking gloomy in the future.
In 2015, the growth of import volume for plastic
products was only 2.3%. The demand for plasticizer and solvent decreased
obviously.
-Down
on price of whole industy
The prices of the products for both octanol
upstream and downstream all fell over the lowest prices in 2008. The decreasing
prices are mainly attributed to the capacity expansion.
The gloomy global economy led to weak
demand in the end-product market. Moreover, with the increasing awareness of
environment, developed countries in Europe and the US have limited the use of
DOP on many products, which is another important reason for the falling prices.
-Fall
of profit of octanol products
Though the capacity of propylene kept
releasing in 2015, the demand is still in shortage, which has put more pressure
of cost on octanol producers.
With the release of octanol capacity and the
sluggish downstream market, the octanol producers were in deficit.
The profit margin was higher compared to
the past two years, which was attributed to discount offered by the octanol and
phthalic anhydride. The average profit of DOP was RMB100-200 per annually while
the producers of octanol and phthalic anhydride were in huge deficit. Currently,
the price of propylene stayed high, at about RMB5,850-5,950/t in Shandong
China.
Due to the high price of propylene and the low price of octanol, China
Dongming Oriental Group postponed its operating time. It is predicted the price
of octanol won't fall any longer.
The octanol producers still have to deal
with the high price pressure of propylene. There is not
much storage of octanol in the producers, and its price would rise by
RMB200-300/t.
It is predicted that the net profit margin
of octanol would be narrow.
CCM will post the second part of Analysis
on raw materials in plasticizer industry - phthalic anhydride next week.
Please keep following us.
*This article is edited and translated by
CCM. The original one comes from Economic Analysis of China Petroleum and
Chemical Industry.
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