[Basic Chemicals] Is spring still far off for the petrochemical industry?
EO (ethylene oxide) had been profitable for years, but now it's losing money across the board. In 2023, China's EO capacity reached 8.863 million tons/year, with an operating rate of only 55.72%. Traditional EO uses naphtha-cracked ethylene as feedstock, while Satellite Chemical uses ethane, which is low-cost and can stay profitable—they're even adding 1.48 million tons/year of capacity in 2024. That shows how important low cost is for petrochemical projects. So the way out for EO: first, cut costs; second, actively develop export markets for downstream products like polyether monomers and ethanolamine; third, develop high-end products to replace imports—in 2023, imports of EO derivatives like glycol ethers, ethanolamine, and nonionic surfactants totaled 263,900 tons; fourth, expand applications for new products like ethylenediamine and polyetheramine; fifth, refining and chemical companies should adjust their product mix, boost aromatics for PTA, and combine with EG (ethylene glycol) to make PET (polyethylene terephthalate); sixth, the CO2 route—CO2 can be combined with EO to make PEC (polyethylene carbonate) biodegradable plastic, or to produce PC (propylene carbonate), and CO2 can also be combined with biomass-based ethylene to make EO, forming an internal loop. That has good prospects for the future.
On propylene and downstream products. Control of domestic crude oil processing capacity will cap the peak in refinery propylene supply, and future growth will mainly come from PDH (propane dehydrogenation to propylene). It's estimated that in 2024, China will add 13.92 million tons/year of propylene capacity, of which PDH adds 8.41 million tons/year. The propylene chain is oversupplied almost across the board, and operating rates have dropped sharply.
Acrylic acid production is concentrating toward leading companies like Satellite Chemical, Shanghai Huayi, Wanhua Chemical, and BASF. Looking at chain profits, propylene is negative, while methyl acrylate and ethyl acrylate have better margins. Upstream of acrylic acid is acrolein, which could be considered for making high-end fine chemicals like glutaraldehyde, 1,3-propanediol, and allyl alcohol. Downstream, acrylic acid can be used for high-performance acrylate emulsions, acrylate rubber, EEA (ethylene-ethyl acrylate), EAA (ethylene-acrylic acid copolymer), SAP (superabsorbent polymer), and so on.
Acrylonitrile: China's capacity was 4.139 million tons/year in 2023, estimated at 4.789 million tons/year in 2024, and 7.919 million tons/year by 2027. ABS (acrylonitrile-butadiene-styrene) resin is the main driver of acrylonitrile consumption, with capacity of 7.705 million tons/year in 2023, expected to reach 11.405 million tons/year by 2027, an average annual growth rate of 10.3%. In addition, China's polyacrylamide capacity reached 1.62 million tons/year in 2023, making it the world's largest producer, consumer, and net exporter; acrylic fiber profits are recovering, with growth mainly in carbon fiber precursor production.
PO (propylene oxide): in 2023, China's output was 4.35 million tons, consumption 4.691 million tons, capacity 6.17 million tons/year, with proposed and under-construction capacity of 7.95 million tons/year—oversupplied. Since the vast majority of PO goes into polyether polyols, integrating PO and polyether operations is the general trend. Building energy efficiency, polyurethane wind turbine blades, new energy vehicles, biodegradable plastics, and green PO exports all bring opportunities for PO.
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