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“During the 13th Five-Year Plan period, projects related to refining and chemical integration, ethane cracking, propane dehydrogenation, and coal-to-olefins were developed in large numbers. On the one hand, large-scale new production capacity will be put into operation gradually; on the other hand, as the goal of reaching carbon peak is achieved, consumption of petrochemical products will also reach its peak. The refining industry is set to enter an era of intense competition; how can companies succeed? At the “2021 China Chemical Parks and Industrial Development Forum” and the “Sub-forum on High-quality Development of the Petrochemical Industry” held last week, experts in attendance provided interpretations on this topic. The period from 2020 to 2025 will see a peak in capacity expansion, according to Qu Liang, a senior engineer at the Planning Institute of China National Petroleum Corporation. Since 2014, polyolefins have maintained high levels of return on investment, attracting substantial domestic capital; as a result, there was an unprecedented peak in capacity expansion between 2020 and 2025. Regarding ethylene, during the 14th Five-Year Plan period, the production capacity of ethylene and ethane from traditional steam cracking processes will be the main driver of growth. In 2020, Xinpǔ Chemical, Panjin Baolai, and Yantai Wanhua put into operation a total production capacity of 2.65 million tons per year for ethylene via the ethane and light hydrocarbons cracking route; there is an additional capacity under construction amounting to 3.25 million tons per year, with a planned capacity of 6.7 million tons per year. In terms of propylene, capacity expansion will proceed on multiple fronts, with new projects mainly featuring large-scale production using advanced processes; the total capacity under construction or planned for steam cracking, CTO/MTO, and PDH methods exceeds 30 million tons per year. It is expected that production will reach 8.83 million tons per year in 2021, with steam cracking, CTO/MTO, and PDH accounting for 4 million tons per year, 920,000 tons per year, and 3.9 million tons per year respectively. Following the peak in consumption of refined oil products, a peak in the consumption of petrochemical products will also arrive. To achieve the goals of carbon peak and carbon neutrality, as well as to promote the development of environmentally friendly plastics, China’s ethylene consumption is expected to reach its peak around 2030. As demand for traditional bulk petrochemical products is entering a period of slower growth, and with a sharp increase in supply, it is estimated that by 2025 there will be a 70% surplus of such products in the domestic market, with an overall self-sufficiency rate reaching 116%. In terms of the degree to which the effective production capacity meets demand for key petrochemical products, the C2 ethylene industry faces hidden overcapacity pressures; the C3 industry is generally in supply-demand balance; the C4 industry has 25% overcapacity. The PX-PTA polyester industry also faces significant overcapacity pressures. As orders for textiles and clothing are shifting to other regions, export volumes continue to increase. “The era of \"involution\" has arrived, with increased optimization and restructuring. Qu Liang believes that the domestic refining and chemical industry is seeing accelerated mergers, restructurings, and capacity integrations – the era of \"involution\" has begun. “Towards the end of the 13th Five-Year Plan period, the trend of optimization and restructuring in China’s petrochemical industry intensified: in 2018 and 2019, 189 and 342 chemical companies respectively announced bankruptcy, and due to the impact of the pandemic in 2020, the number of bankrupt companies in China exceeded 320. With the explosive expansion of domestic production capacity in 2021 and 2022, profits in China’s chemical industry are expected to decline in the second half of the year, potentially reaching a new low in 2022. Cheng Lihong, head of the Consulting and Evaluation Department at the China Chemical Industry Economic and Technical Development Center, said that the 14th Five-Year Plan period will still be a time for the expansion of refining capacity; projects such as Lianyungang Shenghong Petrochemical, Jieyang Sinopec refinery, Gulai Refining and Chemical Complex in the Liaodong Bay area, and new projects at Zhenhai Refining and Chemical Complex will all come online one after another. From 2021 to 2025, the additional production capacity of ethylene in China will mainly come from ethylene produced through integrated refining and petrochemical processes, as well as from ethylene manufactured by cracking imported raw materials. It is estimated that 23.83 million tons of additional ethylene production capacity will be added during the 14th Five-Year Plan period, bringing the total capacity to nearly 58 million tons by the end of that period. The entire petrochemical integration project shows several trends: first, development towards coastal areas; second, a significant increase in the size and scale of manufacturing facilities; third, substantial expansion of production capacity; fourth, the entry of many private and foreign investors. Competition takes place in the upstream sector, while profitability depends on the downstream market. Qu Liang pointed out that the next 5 to 10 years will be a critical period for existing refining and chemical enterprises to carry out adjustments and upgrades. China’s entire petrochemical industry will develop in the direction of industrial clustering, vertical integration of the supply chain, and higher-end, diversified product offerings. How can companies succeed in an environment of diversified raw materials? Li Xiujie, deputy chief engineer at Jiangsu Sierbang Petrochemical Co., Ltd., believes that competition takes place in the upstream sector, while profits depend on the downstream sector. ● For the oil-based olefins industry, the thorough utilization of by-products is crucial, and integration is the trend ； ● For CTOs, the price of polyolefins determines profit levels ； ● For MTO companies, basic infrastructure and industrial chains are crucial ； ● For PDH, moderate growth is still possible in the medium to long term. From the perspective of upstream raw materials, the trend toward lighter olefin raw materials is a global phenomenon. Excluding policy factors, the production of lighter olefins generally possesses strong cost competitiveness and profitability over most periods of time. From the perspective of downstream products, the olefin route is not a quick solution; it is the downstream products that determine profitability. Li Xiujie suggested: First, it is necessary to adapt measures to local conditions and pursue moderate development ； Second, great importance must be attached to the source of raw materials ； Third, efforts should be made to achieve higher quality and greater precision ； Fourth, fully extend the industrial chain. Disclaimer: The content contained herein is sourced from the Internet, WeChat official accounts, and other public sources. We maintain a neutral stance regarding the views expressed in it; this article is intended for reference and discussion only. The copyright of the reproduced articles belongs to the original authors and institutions; if there is any infringement, please contact us to have it removed. Source: China Chemical Industry Information Weekly