Thread Content
A recovery in the hydrogen peroxide market is still some time away. Author/Source: Sinochem New Network Date: 2020-08-12 Clicks: 4 Since the beginning of this year, the price trend of hydrogen peroxide in China has been downward overall. Taking 27.5% concentration hydrogen peroxide in the East China region as an example, the price at the beginning of the year was around 1,100 yuan per ton; it has now dropped to 940 yuan, representing a decline of 15%. Looking at the average price, it has also shown a downward trend; the average price this year is around 914, a 12% decrease compared to the same period last year. In the author’s view, the hydrogen peroxide market will remain in a state of weak supply-demand balance in the short term. Given the severe global pandemic situation, foreign trade in this sector will continue to face obstacles, and it will take some time before the hydrogen peroxide industry chain can recover. In terms of production capacity, according to statistics from Chemical Online, as of the end of 2019, there were over 70 hydrogen peroxide manufacturing enterprises in China. The majority of these plants used the anthraquinone process for hydrogen peroxide production; the total production capacity was more than 3.8 million tons (on a 100% pure basis, the same applies hereafter), with output reaching over 2.9 million tons. The industry’s operating rate was around 75%. The new production capacity added in 2019 was lower than expected, mainly due to the withdrawal of some production capacity; the actual increase in production capacity was around 83,000 tons. This year, the planned increase in production capacity is substantial, but the pace of implementation falls short of expectations. From January to July, a total of 4 hydrogen peroxide manufacturers put into operation facilities with a combined capacity of 250,000 tons per year. In August, Shandong Luxi Chemical plans to commission a hydrogen peroxide facility with a capacity of 83,000 tons per year; furthermore, there are plans to bring online additional production capacities of over 1.7 million tons per year in the future. In terms of profits, hydrogen peroxide achieved considerable profitability in 2019, with a gross margin of up to 50% throughout the year, making it one of the most profitable chemical products. Affected by the pandemic this year, industry profit levels have declined significantly; the gross margin dropped to negative values on several occasions in the first half of the year, and overall profits were almost halved compared to the previous year. Fortunately, the profit levels in this industry remain positive compared to those of other chemical products; the profits are still considerable, which encourages companies to be more active in production, and there is an expectation of an increase in the supply of hydrogen peroxide. In terms of demand, the downstream applications of hydrogen peroxide in China are mainly found in industries such as caprolactam, papermaking, and printing and textiles; these three sectors account for 30%, 27%, and 23% of hydrogen peroxide consumption respectively. In terms of caprolactam, the industry has seen rapid development in recent years; by the end of 2019, domestic production capacity had reached over 4 million tons, with plans to add another 7 million tons in future. Judging from this year’s situation, the caprolactam industry has operated well in the first half of the year, with an operation rate of over 80%; it is expected that this rate will remain around 80% in the coming period as well, with relatively stable demand support. The papermaking industry is heavily constrained by foreign trade; small and medium-sized paper manufacturers have reduced production significantly, resulting in an overall unsatisfactory level of operation. Demand in other areas is relatively weak, providing little support for the raw material hydrogen peroxide. Overall, as new production capacity continues to be added, the oversupply issue in the hydrogen peroxide market will become increasingly prominent. As the growth rate of China’s national economy slows down, imbalances in supply and demand as well as declining profits will push enterprises into a phase of consolidation through survival of the fittest. The share of production capacity held by large enterprises and new facilities will gradually increase, while small enterprises and older facilities will be phased out gradually; thus, an iteration within the hydrogen peroxide industry is inevitable.