In 2022, China’s PX capacity utilization rate is expected to drop to around 61%
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From 2010 to 2020, China’s annual imports of PX increased from 3.527 million tons to 13.861 million tons, a increase of 2.93 times； China’s PX production capacity increased from 7.26 million tons to 26.65 million tons, a rise of 2.67 times ； Global PX capacity increased from 36.7 million tons to 67.63 million tons, a growth of 84% ； China’s PTA production capacity increased from 16.12 million tons to 62.92 million tons, a rise of 2.9 times ； China’s polymer production capacity increased from 28.84 million tons to 63.11 million tons, a 1.19-fold increase. (The above data is sourced from Longzhong Information and Zhongxian Network). Differences in the speed of capacity expansion have led to mid- and upstream PX and PTA sectors, which have seen rapid capacity growth in recent years, passing on benefits to the downstream polyester sector. The polyester bottle sheet industry suffered losses from 2012 to 2015; conditions improved starting in 2016, and substantial processing profits emerged in 2017. Polyester filaments and staple fibers also achieved decent profits from 2017 to 2020. If the PX import volume of 1,386 tons for the entire year of 2020 is maintained in 2022, China’s PX utilization rate will drop to around 61%. China’s PX plants rely on new domestic facilities to phase out old production capacities both at home and abroad, using domestic production to displace and replace imported volumes thereby reducing reliance on PX imports. Furthermore, increased exports of polyesters could raise the domestic polyester utilization rate by about 5 percentage points to around 77.5%.
Apart from Sinopec and CNPC, the major integrated refining and petrochemical companies are all listed private enterprises: Hengli Group, Rongsheng Group, Hengyi Group, and Shenghong Group. At present, Hengli Group has a crude oil processing capacity of 20 million tons per year, an ethylene production capacity of 1.5 million tons, a PX production capacity of 4.5 million tons, and a PTA production capacity of 11.6 million tons. In Huizhou, there is an under-construction PTA facility with a capacity of 5 million tons, as well as a polyester production capacity of 5 million tons. Hengli Group is investing in coal chemical industry to achieve integration of the olefins, aromatics, PTA, and polyester value chains through this sector. Rongsheng Group currently has a crude oil processing capacity of 40 million tons ； Ethylene production capacity: 1.4 million tons; under construction: 2.8 million tons ； Ningbo CICC and Zhejiang Petrochemical’s combined PX production capacity amounts to 5.6 million tons; an additional 4.5 million tons of PX production capacity at Zhejiang Petrochemical will come online in 2021 ； Yisheng Petrochemical, in a joint venture with Hengyi Petrochemical, has a PTA production capacity of 13.5 million tons; an additional 6.6 million tons of production capacity will come online in 2021. Its own fiber production capacity is 1.1 million tons, while Yisheng Petrochemical’s bottle sheet production capacity is 2.7 million tons, with another 1.3 million tons under construction. Additionally, Yisheng Petrochemical plans to add another 2 million tons of production capacity for bottle sheets. Zhejiang Petrochemical has also planned a third phase of an integrated refining project with a capacity of 20 million tons. In addition, two more ethylene production units are planned for the later stage of phase two, aiming to increase the ethylene production capacity to 10 million tons per year.
Hengyi Group in Brunei currently has an oil refining capacity of 8 million tons and a PX production capacity of 1.5 million tons； Yisheng Petrochemical, in a joint venture with Rongsheng Petrochemical, has a PTA production capacity of 13.5 million tons; an additional 6.6 million tons of production capacity will come online in 2021 ； Own fiber production capacity: 7.25 million tons ； Hengyi Brunei Phase II is currently in the land reclamation stage, with planned new production capacity of 14 million tons of refining products, 1.5 million tons of ethylene, 2 million tons of PX, 2.5 million tons of PTA, and 1 million tons of bottle-grade material. Shenghong Group already has a PTA production capacity of 3.9 million tons and a polyester production capacity of 2.1 million tons ； A refinery project with a capacity of 16 million tons is under construction, featuring an ethylene production capacity of 1.1 million tons and a PX production capacity of 2.8 million tons.
Hengli Group and Rongsheng Group have fast project construction speeds, short construction periods, and rapid investment recovery, allowing them to recoup their investments during the favorable profit period for ethylene before its production capacity becomes saturated. However, their downstream polyester projects are relatively smaller in scale compared to PTA projects, resulting in greater sales pressure for PTA. The Shenghong Group’s projects started late, and once the ethylene, PX, and PTA facilities come online, they may face a challenging market environment. However, the capacity allocation across various links in its industrial chain is relatively good, in addition to which there are also large-scale coal chemical projects. The Hengyi Group’s integrated refining and petrochemical project in Brunei is located abroad; as a result, its construction progress is slower than that of similar projects in China, it has been severely affected by the COVID-19 pandemic, and it is far from the Chinese market. Therefore, the cost of building this project and the time required for its completion will be higher compared to those of similar integrated projects in China. However, the Hengyi Brunei project is not subject to strict administrative approval processes like those in China, and there are few anti-dumping issues regarding the export of its products to various parts of the world. Brunei has no value-added tax or consumption tax. It can utilize low-cost coal from nearby Indonesia for power generation, and it can make use of local crude oil; there are no import quotas required for purchasing such oil. The export of refined oil is not subject to export quotas like in China. Additionally, the project enjoys a tax exemption on corporate income for up to 24 years. In addition, Hengyi has a large domestic polyester production capacity, and its PTA sales channels are relatively smooth. Overall, the Hengyi Brunei refining and petrochemical integration project faces significant pressures before it goes into operation, but it is likely to have advantages over domestic integration projects once it is operational. Hengyi Group also has a caprolactam project.
Given that China has tightened the approval process for new refining capacity since 2020, refining profitability is likely to start improving from 2021; the processing margin between naphtha and crude oil will gradually improve. The PX projects of integrated refining enterprises that use crude oil as raw material will be more profitable than those that use naphtha as raw material. In 2022, PX production capacity will be roughly in line with apparent consumption, and after 2023 the PX industry may reach a bottom point before gradually returning to a period of prosperity.
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