The China Petroleum and Chemical Industry Federation releases a BDO production capacity warning report

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At the 2023 Petrochemical Industry Development Conference held in Beijing on April 11, Sun Weishan, vice president of the China Petroleum and Chemical Industry Federation, released the \"2023 Annual Capacity Warning Report for Key Petrochemical Products.\" In releasing the ‘Report’, Sun Weishan said that what requires special attention in the future is the increasingly evident trend toward integration in China’s petrochemical and basic chemical industries. Since the start of the 14th Five-Year Plan period, products such as olefins, aromatics, polyolefins, polycarbonates, titanium dioxide, 1,4-butanediol (BDO), propylene oxide, polyether polyols, and lithium iron phosphate have continued to see rapid expansion in production capacity; the supply capacity for major petrochemical products has increased significantly. It is expected that the operating rates of plants producing products with large shortages, such as ethylene and polyethylene, will increase in 2023 ； The operation rates of refineries, fertilizer plants, methanol plants, etc. remain roughly the same as in 2022 ； Substances such as soda ash, BDO, and titanium dioxide often see a decrease in plant utilization rates due to increased production capacity ； The capacity utilization rates for styrene-butadiene-styrene copolymer (SBS), polycarbonate, ethylene glycol, purified terephthalic acid (PTA), etc. remain low, and the operating rates of these production facilities continue to decline. Sun Weishan warned, “The products that deserve special attention in 2023 include propylene, ethylene glycol, p-xylene, PTA, BDO, titanium dioxide, polypropylene, polycarbonate, propylene oxide, and lithium iron phosphate.” ”Among them, the production capacity of 1,4-butanediol (BDO) is growing rapidly, with short-term capacity utilization remaining low. In 2022, China’s BDO production capacity was 2.76 million tons per year, representing a growth rate of 26.9% ； Production amounted to 1.955 million tons, an increase of 7.4% on a year-on-year basis ； As the production capacity of the newly added units has not been fully utilized, the operating rate of these units is 71.1%, a decrease of 12.6 percentage points compared to the previous period. Imports amounted to 81,000 tons, a 29.8% increase on a year-on-year basis and reaching a record high; domestic companies actively expanded into overseas markets, with exports reaching 66,000 tons, a 116.4% increase compared to the previous year ； The apparent consumption volume was 1.97 million tons, an increase of 6.4% on a year-on-year basis. Currently, there is strong enthusiasm for building new production capacity in China’s BDO sector. In 2023, 7 new projects will come online in China, adding 1.3 million tons per year to production capacity, bringing the total capacity to 4.06 million tons per year – an increase of nearly 30%. The growth prospects for BDO’s downstream markets in our country are favorable. While demand in traditional key downstream sectors such as PTMEG-spandex and GBL-NMP continues to rise steadily, new application areas such as PBAT/PBS biodegradable materials and solvents for new energy batteries are also developing rapidly. It is estimated that domestic demand for BDO will reach around 2.2 million tons by 2023. Given that the rate of capacity expansion is much higher than that of demand, capacity utilization will remain low in the short term. The lithium battery industry chain remains robust, attracting investment waves; the increased capacity deployment is driven by the rapid growth of China’s new energy vehicle and energy storage markets. In 2022, China’s production and consumption of lithium iron phosphate cathode materials doubled. New production capacity added that year was 1.23 million tons per year, bringing the total capacity to 2.15 million tons per year, a year-on-year increase of 133.7%; production volume reached 1.1 million tons, representing a year-on-year increase of 152.6%. Due to the fact that the production capacity of the newly built facility could not be fully utilized, the operation rate of the facility decreased by 10 percentage points year-on-year, falling to 51.2%; the apparent consumption volume was 1.1 million tons, an increase of 152.4% on a year-on-year basis. Lithium iron phosphate batteries are highly favored by automotive manufacturers due to their cost advantages and excellent performance. By 2022, they had surpassed ternary batteries to become the most widely used power batteries in new energy vehicles, creating opportunities for companies involved in the production of lithium iron phosphate. In the past two years, there has been a growing interest in investing in lithium iron phosphate cathode materials as well as their precursors such as lithium iron oxide. Based on the progress of the projects under construction, it is estimated that the production capacity for lithium iron phosphate will reach 3.1 million tons per year in 2023, representing a growth of around 50% compared to the previous year. The output volume will be 1.8 million tons, and the operating rate of the production facilities will rise to 58%.