Could the surplus risk of coal-based ethylene glycol emerge in one or two years?

Thread Content

Could the surplus risk of coal-based ethylene glycol emerge in one or two years? Author/Source: Huahua Net Coal Chemicals Date: 2018-08-16 Clicks: 29. In 2017, 5 new projects were launched, 2 projects resumed operations, and work progressed on 14 other projects, resulting in a total production capacity of 7.39 million tons. In 2018, plans were in place to increase production capacity by 3.5 million tons... The development of the coal-based ethylene glycol industry has entered an unprecedented \"fast track\" in recent years. Not only has production capacity increased, but profitability is also quite impressive. According to the data provided by JLNCC, coal-based ethylene glycol has the lowest cost among the three existing methods for producing ethylene glycol in China; in regions with abundant coal resources in the west, the cost per ton can drop as low as 5,100 yuan. As technology continues to mature, it has become the driving force behind the development of ethylene glycol, and currently all companies producing ethylene glycol from coal are profitable. However, despite this favorable outlook, several industry experts said in interviews with journalists that too many coal-based ethylene glycol projects have been launched in recent years at too rapid a pace, posing a risk of overcapacity; therefore, such projects should be pursued with caution. Its production capacity accounts for about 35% of the total capacity for ethylene glycol. It is reported that ethylene glycol is primarily used in the production of polyester fibers, polyester resins, humectants, plasticizers, surfactants, synthetic fibers, and cosmetics; it is also used as a solvent in dyes and inks, in the formulation of antifreeze for engines, as a gas dehydrant, and in the production of resins – its applications are very diverse. Regarding the production routes for ethylene glycol, it is stated that currently, petroleum-based ethylene glycol accounts for about 56% of the total production, coal-based ethylene glycol accounts for around 35%, with the remainder being produced from methanol. Statistics released by the China Coal Processing and Utilization Association show that as of the first quarter of this year, 17 coal-to-ethylene glycol projects have been put into operation in China, with a total production capacity of 3 million tons per year – accounting for about one-third of China’s total ethylene glycol production capacity. At the same time, there are still 12 projects under construction for coal-based ethylene glycol, with a total production capacity of over 3 million tons per year. In addition, a total of 4 million tons per year of coal-based ethylene glycol production capacity, for which projects were initiated or planned in 2017, is expected to come online in 2020 and thereafter. The reporter noted that among the 17 coal-based ethylene glycol production projects that are already in operation, Henan Energy and Chemical Group alone has 5 of them, located in Xinxiang, Puyang, Anyang, Luoyang, and Yongcheng. From 2012 until March 8 of this year, all 5 sets of ethylene glycol plants with a capacity of 200,000 tons per year were put into operation. Statistical data show that as of now, the coal-to-ethylene glycol production capacity of Henan Energy and Chemical Group has reached 1.4 million tons per year. Wang Ping, an analyst at Zhuochuang Information, said in an interview with reporters that the price of coal-based ethylene glycol has been around 7,800 yuan per ton recently, up by 1,150 yuan per ton since the end of June. It is expected to experience short-term fluctuations and adjustments, with upward pressure at higher levels. “The profit per ton of ethylene glycol produced from coal is around 2,000 yuan. ”Wang Ping explained. Approval is simple and the technology is mature. Why has the coal-based ethylene glycol project developed such a large production capacity? The reporter learned that currently, coal-based ethylene glycol projects only require approval at the provincial level to determine whether to proceed with them, without the need for approval from **relevant departments. An industry insider who wished to remain anonymous believes that approval at the provincial level alone is sufficient, which could increase the risk of a lack of overall planning in the development of the coal-based ethylene glycol industry. In some areas, there is an inevitable tendency to give more consideration to local fiscal revenues; as a result, the launch of too many coal-based ethylene glycol projects could lead to a surge in the production capacity of such projects across the country. “**The relevant departments intend to bring the approval authority for coal-based ethylene glycol projects under the control of relevant ministries, in order to improve the overall planning for such projects. ”A senior official from the Petrochemical Department of the Environmental Engineering Assessment Center under the Ministry of Ecology and Environment revealed. In addition to the lower approval requirements, Wang Ping believes that the main reason for the large number of coal-based ethylene glycol projects being launched in recent years is the substantial demand for such products. Related studies show that global demand for ethylene glycol is growing steadily, and as the largest consumer country, China sees an annual growth rate of 4% in demand. In 2017, China’s demand for ethylene glycol was approximately 14.4 million tons, with a total production capacity of 8.47 million tons and actual production amounting to 5.71 million tons. The net import volume was 8.6 million tons, meaning that the supply-demand gap continued to widen compared to 2016, when it was 7.5 million tons; import dependence was nearly 60%. It is estimated that by 2020, China’s polyester production will reach 45 million tons, while the demand for ethylene glycol will exceed 16 million tons. Meanwhile, the oxalate route in coal-based ethylene glycol production is evolving toward lower costs, higher selectivity, a longer catalyst life, and greater environmental friendliness. A study by the China Coal Processing and Utilization Association shows that approximately 45% of imported ethylene glycol will serve as the primary substitute for domestically produced coal-based ethylene glycol. Solving the problems of product quality and supply stability for coal-based ethylene glycol is only a matter of time. As process technologies continue to advance, the establishment of industry standards is expected to accelerate, and coal-based ethylene glycol is gradually gaining recognition among downstream polyester manufacturers. This view was endorsed by a responsible person at Shanghai Pujing Chemical. “Currently, the technology for producing ethylene glycol from coal is largely mature, and the solutions offered by most technology providers are viable. ”The official told reporters. The risk of overcapacity may become apparent in one or two years. A research report by the information services firm Zhiyan Consulting is optimistic about the ethylene glycol market. The research report indicates that China’s reliance on imports for ethylene glycol currently exceeds 60%, with this figure rising to over 75% in 2017. Domestic production capacity is severely insufficient, leaving ample room for import substitution. The consumption of textiles and clothing remains relatively stable, providing support for the demand for ethylene glycol. Wang Ping believes that the future expansion of coal-based ethylene glycol production is indeed significant, but an excess capacity situation \"is not visible for now.\" An expert in the coal chemical industry said that although there will be significant new production capacity for coal-based ethylene glycol in China over the next three years, given that actual commissioning of these facilities is generally lower than planned and rapid growth in demand is sufficient to offset the supply, the supply and demand situation for ethylene glycol in China is essentially favorable. However, the potential risk of overcapacity in coal-based ethylene glycol production continues to concern many industry insiders. Gao Shihong, an analyst at JLCC, told reporters that although China is currently highly dependent on imports of ethylene glycol, there is vigorous investment in the construction of domestic ethylene glycol production facilities, with coal-based production being the dominant approach; the planned new production capacity for 2018 is almost double that of the previous year. If all the projects under construction come online, it is expected that China will be able to achieve self-sufficiency in ethylene glycol within 4 years, and there may even be a situation of overcapacity. A former executive at Yankuang Group predicted that the time when excess risk would emerge would be even earlier. The official said that in recent years, the construction and commissioning of projects for coal-based ethylene glycol have proceeded too rapidly, and the risk of overcapacity could emerge within one or two years. Gu Zongqin, director of the Petroleum and Chemical Industry Planning Institute, expressed a similar view. He said that in recent years, coal-based ethylene glycol has attracted the attention of an increasing number of investors; there are more and more new projects, and their scale is getting larger and larger, with some projects being so large that they seem unbelievable. “If all these projects are completed as scheduled, China’s ethylene glycol market will soon enter an era of intense cost competition; we must stay clear-headed and proceed with caution when building coal-based ethylene glycol projects. ”