Industry insiders: new devices are put into operation and demand is growing steadily
On August 1, the “Ethylene Glycol Sub-Forum” of the Global Petroleum and Chemical Industry Economic Situation Analysis Conference was held in Yantai, Shandong Province. Several guests from enterprises, institutions and industry associations shared their views and views from different perspectives on the current market situation and industry characteristics of Ethylene Glycol.
Futures Daily reporters learned that, in addition to economic and trade frictions, there has been little change in the demand side of ethylene glycol. The sustained decline since September 2018 was mainly triggered by the concentration of new capacity. According to statistics, the price of ethylene glycol in the main textile raw material market has fallen from 8,230 yuan/ton in early September 2018 to 4,430 yuan/ton in late July 2019, which is close to a “lumbar cut”. In view of the fact that a large number of new projects are planned to be put into operation in the next two years, some guests said that “the market price of ethylene glycol is expected to remain low from 2019 to 2020, and enterprises should be prepared to live a hard life”. In addition, the reporter also learned that the domestic project of coal-based ethylene glycol has developed rapidly in recent years, and great progress has been made in both technology and scale of production. The development and improvement of coal-to-ethylene glycol has gradually become the focus of attention in the chemical industry.
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Demand side: trade frictions have limited impact
Overall stable growth
Futures Daily reporter learned that polyester is the most important downstream area of ethylene glycol. At present, more than 87% of ethylene glycol is used in polyester production, and polyester is the highest proportion of products. Due to the incomparable advantages of natural fibers with low cost and high spinnability, polyester is widely used in garment and textile industry, and the related demand is growing continuously.
According to the person in charge of Sinopec Economic and Technological Research Institute, since 1950, the consumption of natural fibers has been relatively stable, while the consumption of synthetic fibers has shown a greater growth rate. The United Nations expects the global population to grow to 7.76 billion by 2020. Thus, the per capita consumption of synthetic fibers will exceed 1.35 kilograms, and the total consumption will break through the 100 million tons mark for the first time. At present, polyester has accounted for more than 75% of the total consumption of synthetic fibers. It can be said that polyester is not only the main source of the growth of synthetic fibers, but also an important force to support the development of ethylene glycol industry.
Specifically, from 2016 to 2018, China’s apparent demand for ethylene glycol has maintained a steady growth trend. Yang Qianli, general manager of Shanghai Yijing Industrial Co., Ltd., introduced that in 2018, China’s apparent demand for ethylene glycol was 16.6 million tons, of which 9.95 million tons were imported. By comparison, China’s domestic output was only 6.65 million tons, and its self-sufficiency rate just reached 40%, still at a low level. From this point of view, there is still room for growth in domestic demand for ethylene glycol.
At the forum, Ma Xiumei, deputy general manager of Hengli Refining and Chemical Company, also explained to the participants the impact of trade friction on downstream demand for ethylene glycol. “In the fourth quarter of 2018, due to the prevailing early delivery by export enterprises, China’s textile and apparel exports were not significantly affected by the U.S. tax increase measures, but since 2019, the amount of textile exports to the U.S. has declined significantly.” According to the data released by the General Administration of Customs of China, from January to May 2019, chemical fibers, yarns, carpets and non-woven fabrics in textile exports to the United States declined in varying degrees. However, people concerned said that because the scale of China’s textile industry and the matching capacity of the industrial chain have certain irreplaceability in a short time, Chinese enterprises can also circumvent the switch tax through indirect export. In conclusion, the development of polyester industry has provided support for the demand of ethylene glycol. Although trade friction may have adverse effects on the export of downstream products of ethylene glycol, it will not change the overall growth trend of demand side.
B Supply side: Increased competition in imported products with newly added capacity
According to reports, during the 12th Five-Year Plan period, the domestic petrochemical industry continued to develop rapidly, which was manifested in the following three aspects: firstly, the new naphtha ethylene unit was put into operation continuously, and the supporting ethylene glycol unit was relatively large; secondly, the domestic methanol olefin project and the outsourced ethylene ethylene ethylene glycol unit were successively constructed. Third, more than 60 new coal/syngas ethylene glycol plants are under construction and planned to be built in China, with capacity approaching 30 million tons, of which 6 million tons are added around 2020, and most of the remaining projects are planned to be put into operation before 2025.
In 2018, a total of 2120,000 tons of ethylene glycol production capacity were added in the whole year, including CNOOC Huizhou project with an annual capacity of 400,000 tons and Yangquan project with an annual capacity of 200,000 tons. In addition to CNOOC Huizhou project using petroleum technology, other projects are using coal technology. The centralized operation of the new plant led to a 25.57% increase in ethylene glycol production capacity in a year, which reduced market expectations for the price of ethylene glycol.
Yang Qianli said that although no new devices were put into operation in China in the first half of 2019, the total output continued to grow. “In the first half of 2019, the output of coal-based ethylene glycol was 1512,000 tons, an increase of 52% over the first half of 2018, and that of petroleum-based ethylene glycol (including MTO) was 2.465 million tons, an increase of 17.9% over the first half of 2018.” In addition, at present, the total production capacity of ethylene glycol projects under construction and proposed in China is close to 30 million tons. The pressure on the price of ethylene glycol caused by the expansion of production is bound to remain for some time.
Overseas, the period from 2019 to 2023 is a period of rapid expansion of global production capacity. During this period, SASOL, MEGlobal in the United States, Kayang Petrochemical and Jubail Petrochemical in Saudi Arabia and other enterprises have plans to put into operation. The head of Sinopec Economic and Technological Research Institute said that in the next five years, 5.29 million tons of new ethylene glycol production capacity are expected to be added abroad, with an average annual increase of about 1 million tons. North America and the Middle East are areas with relatively concentrated production capacity, and their installations are dominated by the traditional petroleum system.
According to the person in charge, ethylene glycol from North America and the Middle East has a greater competitive advantage in production, thanks to the breakthrough in shale gas production technology and the proximity to oil producing areas. At present, domestic production can not meet the demand, and the rapid growth of ethylene glycol imports leads to more fierce price competition in the domestic market. According to statistics, in 2018, China’s total import of ethylene glycol was 9.8 million tons, an increase of 1.08 million tons over the previous year, an increase of 12.4% over the previous year. In the case of little change in the demand side, the domestic multi-unit centralized production, and then superimposed imports continued to increase, the supply side significantly released, so that the price of ethylene glycol pressure.
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C Coal to Ethylene Glycol: Great Prospects
The characteristics of “more coal and less oil” determine that China must expand the application of coal in chemical industry. In the process of expanding production of ethylene glycol since 2018, it is the large-scale production of coal-based ethylene glycol plant that makes people’s eyes bright. According to statistics, in 2018, the production capacity of coal-based ethylene glycol increased by 1.72 million tons per year, accounting for 81.13% of the total annual production capacity. As of April 2019, the actual production capacity of coal-based ethylene glycol has reached 432,000 tons per year. In addition, production capacity of more than 7 million tons per year is expected to be put into operation by the end of 2022. Yang Qianli estimates that in three years’time, the capacity of domestic coal-based ethylene glycol plant will reach 10 million tons per year, plus petroleum-based ethylene glycol, which can meet 70-80% of domestic demand. At that time, the external dependence of China’s ethylene glycol market will be greatly reduced.
With the continuous optimization of related production technology, the quality of coal-based ethylene glycol has reached the standard requirements of downstream production enterprises. It has been widely used in the production of polyester, bottle flakes, staple fibers and filaments, and the blending ratio has been improved. Yang Qianli said that when polyester enterprises decide the blending ratio of coal to ethylene glycol, they no longer only consider the technical requirements, but also consider the production scale, market price, process equipment, use time, marketing strategy and other aspects comprehensively.
However, some market participants believe that at present, the blending ratio of coal to ethylene glycol in most enterprises is only 20%-30%. The unstable supply is the main reason that restricts its larger-scale application. Polyester enterprises need stable supply to ensure production and sales, but due to the depressed market price from 2019 to now, the start-up rate of coal-based ethylene glycol plant has not reached 60% for a long time, so it can not guarantee the sustainability and stability of supply. Many experts at the meeting agreed that large-scale and high-load operation of coal-based ethylene glycol plant is an important prerequisite to support its future development.
In view of the current low price and fierce competition in the market, Yang Qianli put forward his own thoughts and suggestions from the raw materials and products of coal-based glycol. On the raw material side, “cost reduction is the king of survival”. Even if the oil price rises to $70 per barrel, the production cost of ethylene to ethylene glycol is still lower than that of coal. Therefore, relevant enterprises need to further control the cost of coal-to-ethylene glycol through process innovation and fine management. Futures Daily reporter learned that in recent years, there have been some new changes in the raw material end, some enterprises began to try to use waste gas or coke oven tail gas as raw materials to produce ethylene glycol. There are still some problems to be solved in gas volume, gas pressure stability and purity of tail gas in this technical route. But if it can pass long-term stability certification, it will help to reduce the production cost of subsequent coal-based ethylene glycol plant, and then increase the competitiveness of this technical route.
At the product end, the coal-to-ethylene glycol unit equipped with methanol production line shows greater flexibility. Such devices can flexibly adjust the product structure according to market conditions. For example, when the price of ethylene glycol is low, it can reduce the production of ethylene glycol and increase the methanol load. At present, Xinhang and Yigao units have such capabilities, and many follow-up units have been deployed and designed in the period of investment and technical demonstration. In addition, “PJ-EG polygeneration technology” is also developing. If a set of devices can produce products of multiple varieties and sequences according to the situation, the ability of coal-based ethylene glycol enterprises to resist price fluctuations and adapt to market changes will be greatly improved. Yang Qianli concluded that “coal-based ethylene glycol has made outstanding contributions in alleviating supply constraints, reducing production costs and enhancing the competitiveness of domestic polyester fiber enterprises, and its prospects are bound to coexist with challenges and opportunities. It is believed that the coal chemical industry can prove that the coal-to-ethylene glycol route is a “road to go, to go well”.
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