Cost advantage of China's CTO projects suffers from impacts

Report edition: 2014 edition(1)
Finished time:
Document type: PDF
Total pages : 31
Language version: English
Published by CCM
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  • Introduction
  • Main contents
  • List of tables
  • List of figures

Description:

CTO hot topic:
In 2014, China’s coal-to-olefins (CTO) projects encounter a peak in production. The release of production capacities impact China’s olefins market, especially resulting in the prices declines in olefins and polyolefin markets. Nevertheless, CTO projects can still be competitive for naphtha-to-olefins (NTO) projects based on its low raw material cost. The cost difference between CTO and NTO project in H1 2014 remained stable at USD163/t (RMB1,000/t).
However, in H2 2014, the international price of crude oil began to slump, leading to the great declines of olefins factories which use naphtha as raw material. Therefore, the cost, used to troubled China’s petrochemical factories, has become an advantage, which impacted the CTO projects. On 29 Dec., 2014, the international futures prices of crude oil (mainly West Texas Intermediate – WTI and Brent Crude Oil Future – Brent) were below USD60/bbl. What’s worse, the daily outputs of the world’s major crude oil producing countries are still at the peak. Many institutes stated that the crude oil price will not rebound until H1 2015. Insiders of CTO industry exclaim that the coal chemical industry is entering a long depression.

-Background:
The emergence of China’s CTO projects is thanks to China’s strategy on diversification of raw materials for olefins. According to the 12th Five-year Plan of China’s Olefins Industry implemented by the Ministry of Industry and Information Technology of the People’s Republic of China, by 2015, the support capability of China’s ethylene and propylene will reach 64% and 77% respectively and the diversification rate of olefins will reach over 20%. CTO projects can be regarded as the leading role of the diversification strategy of olefins because before H1 2014, the high naphtha cost drove China’s olefins industry into losses.
Nevertheless, the development of China’s CTO projects has not been all plain sailing. In detail, its large carbon emission and water consumption are being questioned constantly especially those projects which under construction in Western China with frail ecological environment. Until Oct. 2014, the National Development and Reform Commission of the People’s Republic of China moved CTO projects out from the Catalogue for Encouraged Industries in Western China to strengthen the approval and management of these projects. In fact, it's the falling international price of crude oil price in this half year that impacts olefins industry. Investors have to re-examine the CTO projects due to the decreasing economy benefits.

What to report:
Through different cost evaluation models, combining with views of authoritative experts, CCM gives corresponding development strategy by analyzing the problems and challenges of CTO projects from upstream to downstream.
At the same time, the report also focuses on the future development of propane dehydrogenation (PDH) project and imported methanol-to-olefins project, two competitors of CTO projects.

-Forecast:
As a whole, CCM is optimistic to the development prospect of China’s CTO projects. At present, the crude oil price actually impacts CTO industry greatly. However, based on the domestic energy structure and huge gap of olefins, as well as the scarce petroleum resources, the international price of crude oil may not stay at low level for a long time. Therefore, CTO projects are still worthy of development in the long run.

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