Changes in the “blue ocean” of coal-based ethylene glycol production

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Changes in the ‘blue ocean’ of coal-based ethylene glycol Production/Source: Coal Chemical Industry Date: 2019-08-08 Clicks: 2 From initially being a way for coal companies to find new pathways for growth, to the current situation where large-scale production helps alleviate shortages of raw materials for the polyester fiber industry, and on to the foreseeable ‘red ocean competition’, the development of coal-based ethylene glycol industry is bound to involve both challenges and opportunities. What are the opportunities facing the development of the coal-based ethylene glycol industry? What are the challenges? Industry experts discussed these issues at the ethylene glycol sub-forum of the 2019 National Petroleum and Chemical Industry Economic Situation Analysis Conference held in Yantai recently. The industry is developing at a rapid pace. As the world’s largest textile manufacturing hub, China’s polyester industry is growing swiftly, leading to a steady increase in the demand for ethylene glycol. With the construction of numerous integrated refining and chemical processing projects as well as modern coal chemical projects, the once large supply-demand gap for ethylene glycol is gradually being filled by new production capacity in China. Fu Xiangsheng, vice president of the China Petroleum and Chemical Industry Federation, said that in 2018, China’s large-scale polyester manufacturers had an annual production capacity of 54.86 million tons, with an annual demand for ethylene glycol reaching 15.463 million tons; this demand is set to increase further in the future. On the supply side, domestic ethylene glycol production continued to grow in 2018, reaching 10.632 million tons, accounting for about 33.5% of the global total capacity; thus, China became the undisputed largest producer of ethylene glycol. Yang Liang from Sinopec Economic and Technical Research Institute said that as new production capacity in China comes online in large numbers, competition in the ethylene glycol market will intensify. According to statistics, there are currently over 60 ethylene glycol projects under construction or planned in China, with a total annual production capacity of nearly 30 million tons; most of these projects are scheduled to come online between 2018 and 2025. Especially in the case of coal-based ethylene glycol, improved catalyst life and selectivity have enabled stable and continuous operation of the production facilities. Driven by high profits and a significant demand gap, coal-based ethylene glycol projects have sprung up everywhere in recent years, with an obvious increase in their operating capacity. The impact of coal-based ethylene glycol is growing steadily, and its competitiveness is also increasing. “By the end of this year, the annual production capacity of coal-based ethylene glycol is expected to reach 6 million tons, accounting for 48% of China’s total ethylene glycol production capacity. In terms of costs, although oil prices have fallen this year, the gap in costs between ethylene glycol produced from oil and that produced from coal has widened, but it remains around 400 yuan per ton; thus, companies producing ethylene glycol from coal still have room to offer their products at significant discounts. ”Zhao Liang analyzed. Fu Xiangsheng emphasized that as China’s new coal-based chemical engineering technologies become more mature, the stability of production facilities improves gradually, and the quality of coal-derived ethylene glycol also sees significant improvements, leading to rapid progress in this industry. In 2018, the production capacity of coal-based ethylene glycol exceeded 4.1 million tons, accounting for around 40% of the total domestic capacity. It is expected that by 2020 this capacity will surpass 7.5 million tons, with the corresponding share rising to 45.6%. The industry faces three major problems. Fu Xiangsheng pointed out that China’s ethylene glycol industry has achieved remarkable results, but it is also necessary to be aware of the problems faced by this industry. Firstly, the issue of overcapacity has become prominent. As dozens of ethylene glycol production projects begin construction and come online one after another, the total domestic production capacity will reach 16.62 million tons by 2020, and 22 million tons by 2025. Overcapacity will be inevitable, and the profitability of this industry will suffer significant impacts. Secondly, product quality still needs further improvement. In particular, certain specifications of coal-based ethylene glycol products differ from those of petroleum-based products, and as a result they have not been accepted by users in the high-end polyester industry downstream. According to Yang Liang, China currently has six major categories of technologies for coal-based ethylene glycol production, developed by entities such as the Fujian Institute of Research on the Structure of Matter under the Chinese Academy of Sciences together with Danhua and Shanghai Jinmei, as well as Ube Industries together with Gaoxue and Donghua Engineering. Through continuous optimization and adjustments, the quality of coal-based ethylene glycol can meet the standards of downstream polyester filament manufacturers, and its usage ratio has been increasing, rising from 20%–30% to 30%–70%. However, at present, coal-based ethylene glycol still cannot completely replace ethylene-based ethylene glycol. Finally, industrial competitiveness is relatively weak. Globally, the cost of ethylene glycol produced, whether in the Middle East using ethane, propane, and certain naphtha derivatives from oil field associated gases, or in the United States using natural gas, is highly competitive, which will pose a threat to domestic manufacturers. Yang Liang believes that the newly built ethylene glycol plants in China currently have advantages such as strong scale efficiency, low energy consumption, integration of upstream and downstream processes, and proximity to consumer areas, which will enable them to gain an edge in competition with some imported products in the future. However, the Middle East has a clear advantage in terms of raw material costs for ethylene glycol, so it remains highly competitive. It is expected that domestic imports of ethylene glycol from the Middle East will continue to increase in 2020. Finding a path for high-quality development: Fu Xiangsheng pointed out that currently, there is increased uncertainty in the external environment, weak domestic demand, and an oversupply of ethylene glycol production globally, all of which pose challenges to the development of China’s ethylene glycol industry. Therefore, the industry should remain committed to high-quality development, increase investment in technology research and product innovation, improve the level of refined management, reduce energy and material consumption, and continuously enhance its operational efficiency. In addition, it is necessary to accelerate the integration of industry and finance, guiding manufacturing enterprises to make good use of the futures market and to manage risks in their operations through means such as hedging. Yang Qianli, general manager of Shanghai Yijing Industrial Co., Ltd., also believes that the price of ethylene glycol will remain low during 2019–2020. The production of coal-based ethylene glycol depends on effective cost management and the stable operation of the manufacturing facilities; companies need to be prepared for difficult times. For the future development of ethylene glycol, the first requirement is \"dual stability\", namely stable supply and stable quality. Furthermore, achieving 100% application in the polyester sector is the way forward for the industry, with large-scale and high-capacity operation of facilities being a prerequisite. Yang Qianli said that for enterprises producing ethylene glycol from coal, reducing costs is the key to survival. Currently, new developments have emerged in the raw material side for coal-based ethylene glycol production; the use of waste gas or coke oven exhaust as raw materials for ethylene glycol synthesis is now being put into practice. This technical approach faces challenges such as gas flow rates, pressure stability, and exhaust gas purity, issues that need to be addressed through practical application. In terms of products, some enterprises have built \"alcohol-alcohol\" co-production facilities, providing a pathway for the vertical development of the coal-based ethylene glycol industry. Due to the low prices of ethylene glycol, some coal-based ethylene glycol plants equipped with methanol production lines possess considerable flexibility; they can increase the methanol production volume when ethylene glycol prices are low, and vice versa. This enables them to adjust their product mix flexibly in order to achieve greater profitability. “Currently, the coal-based ethylene glycol plants in Xinhang and Yigao already possess such capabilities, and the newly built Rongxin plant also has the ability to switch products. From what I understand, many subsequent installations also adopted such arrangements and designs during the investment and technical evaluation phases. ”Yang Qianli believes that the coal-to-ethylene glycol route is a viable and effective way to find uses for coal resources in western China. In the face of future market competition, it is hoped that the industry will forge a bright path for coal chemical industry with Chinese characteristics.