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[Industry Focus]：Analysis of Current situation of ethylene industry chain, downstream PE, EO, EG, SM, polyvinyl chloride and so on are developing towards diversification and high-end

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By the end of 2021, China had 61 ethylene production enterprises and 79 ethylene plants, with a total production capacity of 41.68 million tons/year, accounting for about 18% of the world's total production capacity. Among them, 41 sets of steam cracking to ethylene (catalytic thermal cracking containing heavy oil) units have a production capacity of 29.48 million tons/year; 27 sets of coal/methanol to olefin (CTO/MTO) units have an ethylene production capacity of 7.15 million tons/year; 6 sets of ethane cracking to ethylene (including mixed alkane cracking) units with a production capacity of 4.9 million tons/year.

ethylene industry is the core of petrochemical industry. Ethylene products account for more than 75% of petrochemical products and occupy an important position in the national economy. It is called "the mother of petrochemical industry". Ethylene has a wide range of industrial uses. It is the basic raw material for synthetic resins, synthetic fibers, synthetic rubber, medicines, dyes, pesticides, new chemical materials and daily chemical products. These chemical products play an important role in promoting the development of the national economy and improving people's living standards.

Current Situation of China's Ethylene Industry

Overall ability

China is the world's second largest ethylene producer after the United States. By the end of 2021, China had 61 ethylene production enterprises and 79 ethylene plants, with a total production capacity of 41.68 million tons/year, accounting for about 18% of the world's total production capacity. Among them, 41 sets of steam cracking to ethylene (catalytic thermal cracking containing heavy oil) units have a production capacity of 29.48 million tons/year. 27 sets of coal/methanol to olefin (CTO/MTO) units with an ethylene production capacity of 7.15 million tons/year; Ethane cracking to ethylene (including mixed alkane cracking) units 6 sets with a production capacity of 4.9 million tons/year.

Ethylene consumption

In 2021, the global total ethylene production capacity will reach 0.21 billion tons/year, and the consumption will be about 0.197 billion tons. my country's new ethylene production capacity will exceed 8 million tons/year, reaching 41.68 million tons/year, which is my country's ethylene industry The largest new increase in production capacity in the history of the industry. In 2021, China's ethylene production will be 37.47 million tons, the equivalent consumption will reach 58.32 million tons, the equivalent gap will reach about 20.85 million tons, and the self-sufficiency rate will be about 64%. Due to the contradiction between supply and demand in the domestic market and the competitive advantages of imported products in terms of cost and quality, in addition to ethylene monomer, China also needs to import a large number of polyethylene (PE), ethylene glycol (EG), styrene (SM) and other downstream derivatives every year.

Main Production Routes of Ethylene

At present, China's ethylene production route is mainly naphtha cracking, accounting for about 72.7%, and CTO/MTO process accounting for about 20.7% (see Figure 1). Ethane cracking to ethylene (including mixed alkane cracking), heavy oil catalytic thermal cracking to olefins, crude oil direct cracking to olefins, ethanol dehydration to ethylene and other technologies have been industrialized, ethylene raw materials show a light, diversified, integrated development trend.

Naphtha Cracking to Ethylene

In recent years, private forces such as Hengli Petrochemical, Zhejiang Petrochemical, Shenghong Refinery and Yulong Petrochemical have risen rapidly, and large-scale refining and chemical integration projects have been put into operation one after another. Central enterprises such as Sinopec, PetroChina and Sinochem Group have made steady progress and promoted petrochemical projects in an orderly manner. ExxonMobil, BASF and other wholly foreign-owned petrochemical projects rush to lay out the Chinese refining and chemical market. Shell, SABIC and Saudi Aramco have cooperated with domestic petrochemical enterprises, the diversification of market entities has developed rapidly, and there have been five major market competition patterns.

in the ethylene profitability is generally stable, supply and demand gap is large, the new refining and chemical integration projects are supporting large ethylene projects. With the commissioning of a number of refining and chemical projects supporting ethylene plants, coupled with some capacity expansion and transformation projects, it is estimated that in 2020-2024, China will add about 16.7 million tons/year of naphtha cracking ethylene production capacity, and the planned ethylene production capacity is about 15.1 million tons/year, with a total new production capacity of about 31.8 million tons/year (see Table 1).

CTO/MTO

2019-2022, CTO/MTO ushered in the peak of production, the average annual new production capacity exceeded 1 million tons/year. By 2025, the domestic CTO/MTO production capacity will be nearly 25 million tons/year. In 2021, under the ups and downs of international oil prices, the outbreak of the new crown epidemic and other unfavorable factors, the coal chemical industry suffered a huge impact, CTO/MTO device still maintained a high operating rate, is the only sustained profitable segment of the coal chemical industry.

The

CTO project is a typical "high pollution and high energy consumption" industry. During the "14th Five-Year Plan" period, my country will strictly control coal power projects, strictly control the growth of coal consumption, and strictly control the environmental access of construction projects. In some areas, only projects that are included in national planning can coordinate energy consumption indicators. For example, in Inner Mongolia, despite the abundant coal resources and obvious price advantages, the control of coal chemical projects has been strengthened. According to incomplete statistics, the new olefin production capacity of CTO/MTO projects under construction or proposed in China is about 20.1 million tons/year (see Table 2), of which the new ethylene production capacity is about 8.5 million tons/year.

Ethane cracking to ethylene (including mixed alkane cracking)

compared with the traditional naphtha cracking route, ethane cracking has the advantages of short process flow, low unit investment and high ethylene yield,

. Especially in the reality of China's oil refining overcapacity and insufficient supply of ethylene, relying on imported ethane resources to develop ethylene industry is a new idea to solve the structural contradiction between oil refining and chemical industry.

In recent years, with the influx of shale gas into the market in the United States, low-cost ethane resources have attracted much attention from the market, and domestic enterprises have laid out ethane cracking to ethylene projects. According to statistics, there are currently about 20 domestic ethane cracking to ethylene (including mixed alkanes as raw materials) projects, with a total production capacity of about 27.75 million tons/year (see Table 3). Except for the two projects of PetroChina, Xinjiang Korla and Shaanxi Yulin, which use local ethane resources, the raw materials of other projects are imported. If they are successfully put into operation, a total of more than 25 million tons/year of ethane raw materials will be imported. According to customs statistics, about 95% of China's imports of ethane come from the United States, while Japan, South Korea, Spain and Germany account for only 5%. The source of raw materials is single and heavily dependent on the United States. Therefore, the implementation of the source of ethane raw materials is the key to promote the ethane cracking to ethylene project.

Crude oil direct cracking to produce olefins

crude oil direct cracking technology crosses the process of crude oil cracking into naphtha, and directly converts crude oil into ethylene, propylene and other chemicals. It is the future realization of less oil and more chemical, high-end development strategy Useful exploration. According to reports, Sinopec announced the successful test of its key research project "Development and Industrial Application of Light Crude Oil Cracking Ethylene Technology", realizing the first industrial application of this technology in China. The chemical yield is nearly 50%, which greatly shortens the production process and reduces Production costs and carbon dioxide emissions. At present, only ExxonMobil and Sinopec have successfully realized the industrial application of this technology.

analysis on Development Trend of Ethylene Downstream Industry

China's ethylene industry has gradually entered a mature period, downstream derivatives mainly include PE, ethylene oxide (EO), EG, SM, polyvinyl chloride (PVC) and other products. In 2020, the five categories of products will account for about 97.2% of the total ethylene consumption. Among them, the largest consumption area is PE, accounting for 63.5% of the total consumption. This is followed by EO and EG, which account for 10.3% and 9.0% respectively (see Figure 2).

PE: Homogeneous competition is fierce, towards differentiation and high-end development

PE main products wired low density polyethylene (LLDPE), low density polyethylene (LDPE), high density polyethylene (HDPE) three categories. PE has the advantages of low cost and good chemical properties, and is widely used in agriculture, industry and daily life. In 2016-2021, domestic PE production capacity continued to expand, with an average growth rate of 12%, with a total production capacity of 27.73 million tons/year in 2021.

At present, China's PE products are mainly medium and low-end general-purpose materials, and high-end PE products are heavily dependent on imports. There are obvious structural problems, that is, the surplus of low-end products and the lack of high-end products. In the next few years, with the continuous expansion of domestic PE production capacity, homogenization competition will be more intense, high-end products of domestic substitution space is huge. Taking metallocene polyethylene (mPE) products as an example, the current domestic market demand is about 1 million tons/year, while China's output in 2020 is only about 110,000 tons. The huge supply gap has stimulated a large number of imported mPE products to enter the Chinese market. Therefore, PE is developing towards high-end and differentiation, which has important practical significance.

EO Development Trend: Integration and EO/EG Flexible Switching

EO is mainly used to produce EG, and most enterprises use EO/EG co-production devices. In addition, EO can also be used in water reducing agent, polyether, disinfection and sterilization and other fields.

In recent years, with the gradual contraction of EG market profits, most EO/EG co-production units have begun to shift to EO production, taking into account the flexible output of both, thus improving economic efficiency. EO production capacity has increased significantly, but the development of downstream products has entered a bottleneck period, and the phenomenon of singularity and homogenization is obvious. The main products, such as polycarboxylic acid superplasticizer monomer, surfactant and ethanolamine, have faced the situation of overcapacity, fierce competition in the industry, and reduced capacity utilization. In this regard, through the integrated development model of upstream and downstream, it will be more conducive to enhancing the core competitiveness of enterprises, such as building ethylene-EO-EG, and then to polyether monomers (such as polyethylene glycol monomethyl ether, allyl polyoxyethylene ether, methyl allyl polyoxyethylene ether), polyoxyethylene type non-ionic surfactants (such as fatty alcohol polyoxyethylene ether) and other complete industrial chains, continue to expand downstream, enrich product categories.

EG: Extend industrial chain, layout multi-product cross-production
.

EG is ethylene's second largest application field. In 2016-2021, with a number of large-scale coal chemical projects and refining and chemical integration projects put into operation one after another, EG production capacity will increase year by year, with a total production capacity of 21.452 million tons/year in 2021.

In recent years, EG production capacity has continued to grow, but downstream demand has slowed down, and overcapacity will become more obvious. From the consumer side, China's EG is mainly used to produce polyester, accounting for more than 90% of the EG consumption structure, the consumption field is relatively single, there are short downstream industrial chain, product structure is similar, low-price competition is serious and other problems.

In the future, through the extension of the industrial chain, we should increase the application and development of unsaturated polyester resins, lubricants, plasticizers, non-ionic surfactants, coatings, inks and other industries, and gradually change the situation of single use, and form From production to application of the industrial chain, enhance product added value to resolve market risks.

SM: Production capacity expands significantly, downstream industries are steadily improving
.

Downstream SM is mainly used to produce styrene polymers and various ionic polymers, such as expandable polystyrene (EPS), polystyrene (PS), acrylonitrile-butadiene-styrene terpolymer (ABS), unsaturated polyester resin (UPR), styrene butadiene rubber (SBR), styrene copolymer (SBC) and other products, among them, EPS, PS and ABS account for more than 70% of domestic SM consumption, and their products are mostly used in household appliances, electronic equipment, automobiles, real estate and other industries.

In recent years, with the production of large-scale refining and chemical integration downstream supporting SM units in China, as well as the surge of propylene oxide/styrene monomer (PO/SM) co-production projects, SM production capacity has shown a sustained growth trend. 2020-2022 is the 3 years of rapid growth of SM production capacity, which is expected to exceed 20 million tons/year by the end of 2022. With the continuous release of production capacity, the domestic supply and demand pattern has changed significantly, with a sharp decline in imports and a small amount of net exports. As the new capacity of SM in 2021 is greater than that of pure benzene, the raw material pure benzene is in short supply, further compressing the production profit of SM. From the consumer side, the three major downstream markets, only the ABS industry to maintain a high operating rate, it is difficult to digest the SM new capacity brought about by the increase in supply and demand, resulting in SM by the contradiction between supply and demand and cost support of the long-short impact, the market trend of range volatility. From the end market, the domestic affected by the new crown epidemic, "home economy" led to a significant increase in sales of small home appliances. At the same time, the foreign epidemic situation is still severe, epidemic prevention products and some home appliances exports exceeded expectations, driving the SM industry chain demand growth, profitability significantly improved.

PVC Development Trend: Quality and Environmental Protection Go Together

PVC is the largest general-purpose synthetic resin material in China. With its outstanding performance-price ratio, it is widely used in industrial and daily necessities, and has excellent wear resistance, flame retardancy, chemical resistance and electrical insulation. There are two main preparation processes for PVC production. One is calcium carbide method. The main raw materials for production are calcium carbide, coal and raw salt. China is limited by the resource endowment of rich coal, poor oil and low gas. It is mainly based on calcium carbide method. A large amount of fresh water resources are consumed in the production process, and there are bottlenecks such as high energy consumption and large pollution. The second is the ethylene process, the main raw material is petroleum. The international market is mainly based on ethylene method, with excellent product quality, advanced technology, more environmental protection and other characteristics, the future has the potential to replace the calcium carbide method.

China is the world's largest producer of PVC, but also a large consumer, the domestic market is in a state of overcapacity. In the context of the current global implementation of the strategy of replacing steel with plastic and wood with plastic to reduce the consumption of mineral resources and wood, PVC resin has achieved tremendous development, and the downstream application market has continued to expand. It is used in plastic profiles, medical blood transfusions, Blood transfusion bags, automobiles, foaming materials and other product fields are widely used. With the acceleration of China's urbanization process and the improvement of residents' living conditions, the society's expectations and requirements for environmental protection continue to increase. The downstream of the PVC industry has entered a stage of fierce competition in quality and environmental protection, and the application fields have been continuously expanded, and the diversified development trend is obvious.

Other product development trends

ethylene other downstream products, such as ethylene acetate, polyvinyl alcohol, ethylene-vinyl acetate copolymer (EVA), ethylene-vinyl alcohol copolymer, ethylene-acrylic acid copolymer, EPDM rubber, etc., currently account for a relatively small proportion, and the application prospects are relatively stable. At present, there is no prospect of rapid expansion of the application field, and there is no threat of being replaced in large numbers. Domestic high-end polyolefin products are generally limited by foreign technical barriers, such as ethylene-α-olefin (1-butene, 1-hexene, 1-octene, etc.) copolymers, domestic technology is not yet mature, with a large space for development. Most of the downstream products of ethylene meet the direction of social and economic development and the needs of consumption upgrading. For example, under the background of carbon peak and carbon neutrality, the photovoltaic industry has entered the fast lane of development, the demand for EVA photovoltaic materials will grow at a high speed, and the market price of ethylene acetate will continue to run at a high level.

Summary

is expected to 2025, China's ethylene production capacity will exceed 70 million tons/year, will basically meet domestic demand, and may even appear surplus. Affected by the national energy consumption "dual control" policy, during the "14th Five-Year Plan" period, the coal chemical and petrochemical industries will face severe tests, causing great uncertainty to ethylene projects using fossil resources as raw materials. Under the background of carbon peak and carbon neutrality, it is suggested that enterprises should fully consider the reduction and substitution of carbon emissions when planning such projects, replace fossil energy through renewable energy and clean electricity, actively eliminate backward production capacity, reduce excess capacity, and promote industrial transformation and upgrading.

ethylene and hydrogen produced by

ethane cracking to ethylene project are important raw materials required by the domestic market, with great development prospects and strong profitability. However, domestic ethane resources are heavily dependent on imports, and there are "stuck neck" risks such as a single source of raw materials, dedicated supply chain facilities, and difficulties in ocean transportation. It is recommended that the National Development and Reform Commission and other industry authorities strengthen planning and guidance, and all enterprises combine their own actual conditions., Carry out in-depth project feasibility demonstrations to avoid "swarming, rushing away" speculation.

ethylene downstream, especially high-end derivatives, will usher in a huge market space. Such as mPE, ethylene-α-olefin copolymer, ultra-high molecular weight polyethylene, high carbon alcohol, cycloolefin polymer and other products will be the focus of the market. In the future, new projects such as refining integration, CTO/MTO and ethane cracking will provide sufficient ethylene raw materials to accelerate the development of ethylene downstream industries in the direction of "differentiation, high-end and functionalization".

Source: Light Hydrocarbon Bar, Sinopec Shanghai Petrochemical, Contemporary Petroleum and Petrochemical, Poker Investors

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