Caution is needed amid the surge in investment in coal-based ethylene glycol production

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Caution Needed as Investment in Coal-Based Ethylene Glycol Gains Momentum Author/Source: China Chemical Industry News Date: 2017-09-13 Clicks: 39 Since the beginning of this year, there have been continuous reports of new projects for coal-based ethylene glycol being signed or planned, and it has become the most popular area for investment in the coal chemical industry. Does this indicate that coal-based ethylene glycol technology is now mature? Are there no more bottlenecks in downstream polyester industry applications? Are the future prospects promising? The technology is not yet fully mature. According to statistics from the China Information Chemical Industry Research Institute, there are currently 11 providers of technologies for producing ethylene glycol from coal, of which 6 have already implemented such technologies on an industrial scale. These include the consortium formed by Ube in Japan, Donghua Technology, and Kako Chemical Technology; the consortium comprising the Fujian Institute of Research on the Structure of Matter under the Chinese Academy of Sciences, Danhua Group, and Shanghai Jinmei Group; the consortium formed by Shanghai Pujing Chemical, East China University of Science and Technology, and Anhui Huaihua Group; the consortium consisting of China Wuhuan Engineering Company, Huashuo Technology Co., Ltd., and Hebi BMW Group (WHB); Sinopec (Yangzi Petrochemical, Shanghai Research Institute of Petrochemistry, Hubei Fertilizer); and the consortium formed by Ningbo Jinyuandong Petrochemical Engineering Technology Co., Ltd., China Chengda Engineering Co., Ltd., Shandong Hualu Hengsheng Chemical Co., Ltd., and the Ningbo Institute of Materials Technology and Engineering under the Chinese Academy of Sciences. 　 　　Looking at the 6 companies that are already in operation, some of the technology providers use catalysts with low performance; some of the process packages still have design flaws; some of the plants cannot operate stably 100% of the time; and the quality of some products does not meet the requirements for use solely in the polyester industry. 　 　　Overall, among these 6 companies, Gao Chemical has the best technical performance, but its drawbacks are high costs related to technology transfer and catalysts. 　　Capacity may become excessive in the future. From a supply perspective, as of August this year, China’s capacity for producing ethylene glycol from oil was 4.87 million tons, with an additional 4.95 million tons in construction or under planning; if all these facilities come online by 2021, the total capacity will reach 9.82 million tons. The capacity for coal-based ethylene glycol production that has already been built and put into operation is 2.67 million tons, while there are projects under construction with a capacity of 4.4 million tons. If all these projects come online by 2021, the total production capacity will reach 7.07 million tons. In addition, the planned production capacity for coal-based ethylene glycol projects has now exceeded 20 million tons. In other words, by 2021, based on the projects that have already made substantial progress, the volume will reach 17.59 million tons. 　 　　From a demand perspective, in 2016, China’s ethylene glycol production was 5.02 million tons, imports were 7.57 million tons, exports were 20,000 tons, and the apparent consumption was 12.57 million tons. Of the 7.57 million tons imported, 4.87 million tons were imported under general trade terms, representing the scope for substitution with domestically produced goods. As for the other 2.7 million tons, since the import trade is carried out under the modes of feed-in and processing with supplied materials, and the products are re-exported after production, domestic raw materials are not used for this portion of supply. 　 　　In other words, in 2016, China’s potential for replacing imported goods was only 4.87 million tons; moreover, since ethylene glycol in the Middle East is produced from ethane through the ethylene production process, its cost is low, making complete substitution impossible. 　　Based on an average annual growth rate of 4% in demand within the polyester industry over the next 5 years, polyester production is expected to reach 42.73 million tons by 2021. Assuming a consumption rate of 0.34 units of ethylene glycol per ton of polyester, the demand for ethylene glycol at that time will be 14.53 million tons. Including other uses, and based on a proportion of 5%, the demand for ethylene glycol is approximately 15.29 million tons. 　　Therefore, by 2021, China’s supply of ethylene glycol was 17.59 million tons, while the demand was 15.29 million tons. If the quality of coal-based ethylene glycol products can fully replace that of petroleum-based ethylene glycol, the industry will have a surplus of 2.3 million tons. 　 　　If the quality of coal-based ethylene glycol is not sufficient for use in polyesters alone, then based on the current maximum mixing ratio of 40%, the maximum demand for coal-based ethylene glycol would be around 6.66 million tons. Meanwhile, the production capacity of coal-based ethylene glycol already reaches 7.07 million tons. It should also be noted that the demand for ethylene glycol in 2021 included at least about 3 million tons from processing trade under inward processing arrangements. If this mode of trade is taken into account, the demand for coal-based ethylene glycol will not exceed 5.5 million tons. In other words, the risk of a surplus in coal-based ethylene glycol will still exist at that time. Even if the plants under construction or already in operation may fail to start up or begin production for various reasons, the planned 20-million-ton ethylene glycol project will continue to be added from time to time. 　　Challenges exist in downstream applications. Based on investigations in the downstream sector, coal-based ethylene glycol in China is primarily used in industries other than the polyester industry, such as antifreeze and UPR. Some companies state that in the production of polyester based on conventional varieties, the mixing ratio should not exceed 40% in order to maintain stable product quality for polyester fibers. In the production of high-end polyester, whose main product is fine-denier silk, the mixing ratio cannot exceed 20%. 　　When the proportion of coal-based ethylene glycol used increases to about 43%, the color value of the polyester products changes gradually, the light transmittance decreases, the thermal stability and antioxidant properties of the products decline, and the appearance of the products turns yellowish. Furthermore, when the proportion of ethylene glycol produced from coal increased from 41% to 43%, sudden fiber breaks occurred after spinning, the number of broken fibers increased, and the strength parameters of the polyester filaments declined to varying degrees. An excessive proportion of coal-based ethylene glycol can cause quality issues in polyester filament fibers, such as a yellowish appearance and fiber breaks. 　　The polyester industry accounts for 76% of the total consumption of ethylene glycol; therefore, resolving the issue of its incorporation into polyester production is a top priority at present. 　　There is still a cost advantage. To address issues in downstream usage, cost is crucial. Based on the cost analysis of coal-based ethylene glycol production that has already been conducted, when the coal price is 400 yuan per ton, a full operational capacity results in a total cost of around 4100 yuan per ton. During the sharp decline in crude oil prices from the second half of 2014 to the present, the lowest price of ethylene glycol was also around 4,500 yuan per ton. In 2016, the production cost of ethylene glycol at Tongliao Jinmei was 4,397 yuan per ton. 　The cost of producing ethylene glycol from oil is primarily influenced by fluctuations in crude oil prices. Even when crude oil prices remain low at $45–$55 per barrel, its cost is still higher than that of coal-based ethylene glycol. 　 　　In summary, the development of coal-based ethylene glycol presents both risks and opportunities. In response, the China Information Research Institute for Chemical Industry puts forward four suggestions: First, new projects should conduct thorough technical evaluations in order to remain competitive in an era characterized by cost competition. Secondly, close attention should be paid to the development of projects related to coal-based ethylene glycol and petroleum-grade ethylene glycol; the planned production capacity of 20 million tons in the future **already exceeds the total market demand. Third, the coal-to-ethylene glycol projects that are already in operation should work together to address the issue of purity in this product, thereby expanding the demand opportunities in the polyester industry. Fourth is the issue of establishing standards for polymeric-grade ethylene glycol. At present, the **only standard is GB/T4649-2008 Industrial Ethylene Glycol, which is not applicable to coal-based ethylene glycol. With different raw materials and manufacturing processes, the inherent quality of the products will inevitably vary. Even if coal-based ethylene glycol meets current standards, it is not equivalent to petroleum-grade ethylene glycol.