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.
Source: Baidu
-Increase
in capacity
By the end of 2015, the total capacity of phthalic
anhydride was 2.565 million t/a in China, accounting for over 40% of the total
capacity and ranking top 1 in the globe. Currently, there are over 40 phthalic
anhydride producers in China. Among the 40 producers, Shandong Hongxin Chemical
Co., Ltd. is the biggest one, with the capacity of 180,000 t/a, accounting for
7% of the total capacity in China.
The capacity of phthalic anhydride is
predicted to be expanded by 720,000 t/a in China in 2016-2017. The actual
expansion would depend on the market and the producers themselves. Though some
planned production equipment has been constructed in 2015, the producers still
postponed its capacity expansion plan to 2016 due to the consideration of
market and capital. If the market still looks sluggish, the production
equipment would be possible to be put aside.
-Down
in both import volume and total consumption
Since 2009, the import volume of phthalic
anhydride has kept falling. According to Free
Trade Agreement between the government of the Republic of Korea and the
government of People’s Republic of China, phthalate products traded will
enjoy zero tariff and the tariffs for phthalic anhydride will remain at 6.5%.
Thus, it is possible that the import volume from Korea would increase in the
future.
Since 2012, the consumption of phthalic
anhydride has also decreased. In 2015, the self-sufficiency rate reached 95%.
The supply of phthalic anhydride is getting
saturated in China. With overcapacity and weak end-market demand, the producers
are facing sales pressure. In the past few years, with too much capacity
expansion of phthalic anhydride and the growth of DOTP (substitute for phthalic
anhydride), the overcapacity became even worse in the industry.
As for the phthalic anhydride market, plasticizer
and unsaturated polyester resin are its main downstream market. The operation
rate is very low and the consumption of phthalic anhydride is much weaker
compared to last year.
-Contradiction
between supply and demand of raw material phthalate
The capacity of phthalate is far away to
reach the need of demand, so the import volume was quite large. In H2 2015, the
growth of phthalate consumption slowed down due to the pressure from the environment
protection policies from the Chinese government on phthalic anhydride.
By the end of 2015, the total capacity of phthalate
reached 139 million t/a in China. However, limited by different factors, the
actual operating capacity was only 960,000 t/a. The speech of capacity
expansion was quite slow compared to the increasing demand from its downstream
product, phthalic anhydride.
In 2016, the capacity of phthalate expanded
by 200,000 t/a. However, the production lines of phthalate were not fully
loaded in the manufacturers and Sinopec Yangzi Petrochemical Company Ltd. cut
down half of its production, which impacted hugely on the weak supply of phthalate.
The capacity structure of phthalate
equipment was quite stable in China, mainly locating in East China (41%), South
China (29%) and North-east China (19%). Based on the location of phthalate
manufacturers, most of the phthalate capacity is also in East China, South
China and North-east China.
At the beginning of 2015, the phthalate
market was sluggish in China. The high profit of paraxylene had infected the
supply of phthalate and almost 40% of phthalate was imported. In the past few
years, the phthalate dealers became less so did the shipment, and the dealers
didn’t have much stock.
The capacity of phthalate would keep
expanding in 2015-2020, but the growth and self-sufficiency rate would be quite
slow. With the increasing on the output, the gap between the supply and demand
would be narrowed down.
- Market of phthalic anhydride produced by phthalate has narrow profit
margin
In 2015, though the price of phthalate
decreased a little bit, the price was still high relatively. Thus, the profit
margin of phthalic anhydride produced by phthalate was quite narrow and most of
these products were in deficit for the producers.
The increasing market of phthalic anhydride
produced by naphthalene was mainly attributed to its high profits. In 2015, the
price of technical naphthalene kept falling, down to around RMB2,000/t. And the
profit of phthalic anhydride produced by naphthalene stayed very high, with the
profit around RMB1,000/t. However, in 2016, the market was sluggish due to the
weak demand for downstream market.
In 2016, much new production equipment of phthalic
anhydride produced by phthalate and more projects of phthalic anhydride
produced by naphthalene are both impacting the phthalate market. It is predicted
that the price of phthalate market is hard to rise.
- Hard for market of phthalic anhydride produced by naphthalene to
develop
Phthalic anhydride has experienced the
changes and upgrade from phthalate to naphthalene as the raw material. In the
past ten years, China has become one of the biggest countries to produce phthalic
anhydride/plasticizer by the development of the industrial chain “phthalate-
phthalic anhydride- plasticizer-PVC”. However, the development of phthalic
anhydride and its upstream and downstream was imbalanced, causing the intense
competition and falling profits.
Since 2011, the price of technical naphthalene
kept falling and the whole industry chose to produce phthalic anhydride using naphthalene
instead of phthalate again. Currently, the capacity of phthalic anhydride
produced by phthalate was 1.765 million t/a and that of phthalic anhydride
produced by naphthalene was 800,000 t/a.
Though phthalic anhydride produced by
phthalate still enjoys advantages, it is not much different from that by
naphthalene. Till now, there is no emerging downstream market for technical naphthalene
market. If technical naphthalene market doesn’t catch up with the upgrading
from the traditional coal chemical industry, the demand of the end-product
would fall definitely.
- Market trend of phthalic anhydride is quite risky
In 2016, the phthalic anhydride market was
sluggish in China and the phthalic anhydride products were in deficit for a
long time. Entering 2016, the price of phthalic anhydride produced by phthalate
kept rising and the products became profitable finally. The price of phthalic
anhydride produced by phthalate rose to RMB6,500-6,600/t from RMB4,800-4,900/t,
up 35.4%.
The downstream market of plasticizer is
still weak and there are not many orders. With the less imported shipment of phthalate
and the low operation rate of the production lines, the price would remain
stable.
In mid-Feb. and mid-March 2016, the DOP
market kept rising. The DOP price in East China increased to RMB7,000/t from
RMB5,900/t, up 18.6%. But both the price growth of DOP raw material – octanol
and phthalic anhydride was faster than that of DOP, and the DOP market is still
under great pressure.
Related Reading: Analysis on raw materials in plasticizer industry - octanol
*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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