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Entering 2019, Zhejiang Petrochemical’s 1.4 million tons per year ethylene plant was set to go into operation, leading to further diversification of the players in China’s ethylene industry and increased competition. Over the course of half a century, China’s ethylene production capacity has evolved from its initial stages to a period of rapid development. It is now moving from this phase of rapid growth toward one of high-quality development, and is accelerating its progress toward becoming a strong nation in ethylene production. The average scale of ethylene plants in our country is 20% higher than the world average. In the 1960s, China’s first steam cracking unit was put into operation at Lanzhou Petrochemical, marking the beginning of China’s petrochemical industry, with ethylene plants playing a key role in it. After half a century of development, China’s ethylene industry has made tremendous progress, with even faster growth since 2005. On the one hand, Chinese enterprises completed the second round of capacity expansion using their existing facilities; on the other hand, they built 12 cracking units with a capacity of over 800,000 tons per year, as well as a number of coal-to-olefins plants. As a result, the total annual production capacity increased from 7.4 million tons to over 25 million tons at present. China is now the world’s second-largest producer of ethylene, after the United States, accounting for approximately 14.7% of the global ethylene production capacity. Although China’s ethylene production capacity and output are growing rapidly, there is still a significant gap compared to market demand. China’s annual net import volume of ethylene derivatives, expressed in terms of ethylene equivalent, accounts for 50% to 60% of its total ethylene equivalent consumption. In 2017, China’s ethylene production was 18.24 million tons, while its equivalent consumption was around 42.5 million tons; as a result, the country still needed to import large amounts of polyethylene and other downstream derivatives of ethylene such as ethylene glycol. Among them, polyethylene accounts for 47% of total consumption, with the import share of high-density polyethylene reaching as high as 59% ； The proportion of imported ethylene glycol is close to 60%. In recent years, as China’s GDP growth rate has slowed down and the consumption base for ethylene equivalent has increased, the annual growth rate of ethylene equivalent consumption has also slowed. “During the 11th and 12th Five-Year Plans, the annual growth rate of ethylene equivalent consumption declined from 10% during the 10th Five-Year Plan period to around 7%, and further dropped to around 5% in the past three years. The scale of the ethylene plant is an important factor affecting ethylene production capacity and unit production cost. In the 1960s, the capacity of China’s first ethylene production facility was only 5,000 tons per year ； From the 1970s to the 1990s, with the introduction of new equipment and processes, the capacity of ethylene plants reached up to 300,000 tons per year; such plants typically consisted of 10 cracking furnaces and two shift furnaces, with each furnace having a capacity of around 30,000 tons per year. Since 2005, advances in materials and technology have made it possible to design and build larger ethylene plants; most of the ethylene plants put into operation in our country have a capacity of 800,000 to 1 million tons per year. To date, China has 32 ethylene production units using steam cracking technology, with an average capacity of 636,000 tons per year – double the level in 2005 – and this figure is also higher than the world average (585,000 tons per year). The development of the ethylene industry continues to improve. As overall production capacity and scale increase, many changes have taken place in the development of China’s ethylene industry, primarily in terms of layout, raw materials, process routes, and the entities involved. The layout of the ethylene industry is of great importance, as it is directly related to the development of the petrochemical industry and economic benefits. Before 2000, 18 ethylene production units were spread across 16 locations in 15 cities; high costs associated with utilities, logistics, environmental protection, and management services posed a problem, it was difficult to make use of the by-products resulting from cracking, and the level of product processing was insufficient, all of which severely affected the overall competitiveness. After entering the 21st century, the layout of ethylene plant construction in China has improved, with new large-scale projects mainly concentrated in East and South China. In 2015, the **National Development and Reform Commission issued the \"Plan for the Layout of the Petrochemical Industry,\" which provided overall guidance for the development of this industry in the coming period. It stipulated that new ethylene production projects should be established in seven major petrochemical industrial hubs: Dalian Changxing Island, Cao Feidian in Hebei, Lianyungang in Jiangsu, Caojing in Shanghai, Ningbo in Zhejiang, Huizhou in Guangdong, and Gulei in Fujian. These projects were to be built in accordance with the principles of integrated refining and chemical processing as well as larger-scale plant designs, with the annual production capacity of ethylene plants reaching over 1 million tons. It takes into account not only resources and market advantages but also the impact of logistics conditions on competitiveness, serving as a guide for the future layout of ethylene production in our country. Regarding the cracking feedstocks, resource factors are a key factor influencing the structure of the cracking feedstocks in an **ethylene plant. During the 1970s and 1980s, due to China’s limited crude oil resources – with a high proportion of heavy oil and little light crude – as well as high prices for light hydrocarbons and naphtha, the raw materials used for ethylene production became heavier in composition; light diesel accounted for over 70% of these raw materials, while light hydrocarbons and naphtha made up only 13%, with another 10% consisting of crude oil flash vapor and heavy oil. By the late 1980s and early 1990s, progress was made in making the ethylene feedstocks lighter and of higher quality; the proportion of light diesel dropped significantly to around 50%, while the proportion of naphtha increased to over 30%. There was also more than 10% in the form of light hydrocarbons and hydrogenation tail oil, but light diesel remained the dominant component. After 1996, with the upgrading of diesel, increased utilization of light hydrocarbon resources, and rising imports of crude oil from abroad, ethylene feedstocks have continued to evolve toward being lighter in weight and of higher quality. The specific gravity of light diesel drops to around 1/3, while the proportion of naphtha increases to around 45%. Entering the 21st century, the proportion of naphtha increased further to over 60%, while that of light diesel dropped to around 10%; there was also about 10% light hydrocarbons and about 10% hydrogenated tail oil. Overall, naphtha is the main raw material for ethylene production in our country, with other materials serving as supplements. In recent years, ethylene producers have made significant progress in improving the utilization of high-quality light feedstocks such as light hydrocarbons from oil fields, condensate, and those from refineries. At the same time, the restructuring of the refining and chemical industry has led to more high-quality raw materials flowing into ethylene production units; the proportion of light hydrocarbons and hydrogenated tail oils exceeds 1/3, the proportion of naphtha drops to around 55%, while the proportion of light diesel falls below 10%. In terms of the production process, before 2008, all ethylene production in China relied on the steam cracking process. Over the past 10 years, the process routes have evolved toward diversification: in 2008, Shenyang Chemical built the first catalytic thermal cracking (CPP) unit using heavy oil as raw material, with an ethylene production capacity of 150,000 tons per year ； In 2010, Shenhua Baotou Coal Chemical Company built the first coal (methanol) to olefins plant using coal as raw material, with an ethylene production capacity of 300,000 tons per year. At present, the steam cracking process remains the dominant method for ethylene production in China, accounting for about 80% of the total ethylene production capacity, while ethylene produced from coal (methanol) accounts for around 17%. There are also some technologies that are in the stage of exploration, research and development, or transition to industrial application, including the production of ethylene via catalytic cracking of naphtha; the production of ethylene from methane using the oxidation coupling (OCM) method or one-step anaerobic processes; the production of ethylene from bio-based ethanol through catalytic dehydration; and the production of ethylene from natural gas, coal, or biomass via syngas. In terms of market participants, before 2005, ethylene production in China was mainly concentrated in the two major companies, Sinopec and CNPC. Since 2005, with the commissioning of ethylene production facilities in joint ventures such as Yangba Integration, CNOOC Shell, Sino-Saudi Tianjin Petrochemical, Fujian United Petrochemical, and Sino-Korean Petrochemical, as well as in coal (methanol) to olefins projects like Shenhua Baotou, Zhongyuan Ethylene, and Ningbo Heyuan, China’s ethylene market has now taken on a structure in which four supply sources dominate: central state-owned enterprises, joint ventures, coal (methanol) to olefins manufacturers, and importers. The future of the ethylene industry looks promising. In the coming years, China’s ethylene production capacity will continue to grow rapidly. Not only do various state-owned enterprises have multiple refining and chemical processing projects under construction or in the planning stage, but also some large private enterprises with strong financial resources are expanding into the ethylene sector. Additionally, some private enterprises have announced plans to produce ethylene through the cracking of imported ethane. At the same time, foreign capital is also continuously flowing in. Some coal (methanol) to olefins projects are also under construction. Taking into account the construction timeline, progress of the projects, and various uncertainties, it is estimated that China’s ethylene production capacity will exceed 32 million tons per year by the end of the 13th Five-Year Plan period, and reach 45 million tons per year by the end of the 14th Five-Year Plan period. With an increasing production capacity base, it still maintains a growth rate of around 7% per year. However, in terms of the growth rate of consumption, as China’s economic growth slows down and the base value of ethylene equivalent consumption increases year by year, the growth rate of ethylene equivalent consumption will gradually decline; it will drop to 4% during the 13th Five-Year Plan period, and further decline during the 14th Five-Year Plan period. Nevertheless, China’s ethylene production still cannot meet market demand. It is estimated that by 2020, China’s consumption of ethylene equivalent will reach 48 million tons, meaning that around 20 million tons of polyethylene and other downstream derivatives of ethylene such as ethylene glycol will still need to be imported. As production capacity increases, there are also more players in the market, leading to increasingly fierce competition. The supply-demand gap for ethylene in our country has attracted the attention of domestic and foreign investors. Not only private and local enterprises will compete in the domestic market for ethylene-derived products, but as regulations on foreign investment in petrochemical projects are relaxed and restrictions on the proportion of joint ventures are lifted, foreign capital will also enter this market. Petrochemical giants such as BASF and ExxonMobil have announced that they will build ethylene plants in China on a wholly-owned basis. The domestic market for downstream ethylene products will gradually develop into a market landscape characterized by interaction among various players such as coal chemical enterprises, private petrochemical companies, local petrochemical firms, wholly foreign-owned enterprises, as well as large state-owned petrochemical companies like CNPC, Sinopec, CNOOC, and Sinochem. Competition will intensify, which will have a significant impact on macroeconomic policies, market regulations, and standard systems. Among the new production capacities, as large ethylene projects such as Zhejiang Petrochemical, Hengli Petrochemical, Zhangzhou Gulei, and Shenghong Petrochemical come online, and some smaller-scale units with poor profitability are shut down, the average scale of steam cracking ethylene plants will continue to increase, reaching around 700,000 tons per year. The layout of the seven major petrochemical industry bases will also be largely established. The ethylene production capacity located in the Yangtze River Delta, Pearl River Delta, and the Bohai Bay region will account for 60% of China’s total production capacity, leading to an even higher degree of concentration. Resources will be optimized and utilized more effectively, enabling intensive operation. With the progress of the times, the technology behind new projects is becoming increasingly advanced. With the adoption of the world’s most advanced production processes and control technologies, the commissioning of new projects designed and built in accordance with the highest international standards for energy conservation and emission reduction, and the continuous overall optimization of existing projects through the use of various advanced technologies and processes, the operational efficiency of ethylene plants has improved significantly, which will help raise the overall technical level of the domestic petrochemical industry. The proportion of high-end products such as high-performance resins, specialty rubbers and elastomers, high-performance fibers and their composites, and functional membrane materials in the ethylene downstream industry is increasing, thereby enhancing its competitiveness. At the same time, by leveraging the energy internet and supply-side reforms to accurately meet consumer market demands and proactively stay informed about cutting-edge developments, the quality and efficiency of supply have also improved. Article reproduced from: Shanxi Coal Chemical Industry Association