Must see! Prospect and Analysis of the "14th Five-Year Plan" for the Development of China's Petrochemical Industry

Sinopec is entering the stage of fierce competition and optimization and reorganization

1. Some domestic petrochemical products are in serious surplus

According to the domestic petrochemical capacity construction, from 2019 to 2020, the production capacity of ethylene and propylene will increase by nearly 1200×104 t/a, polyolefin, PX, PTA (purified terephthalic acid) will increase by more than 1000×104 t/a, ethylene glycol, Styrene increased by about 500×104 t/a, and pure benzene and polyester increased by about 400×104 t/a, which further improved the domestic supply capacity and caused changes in the balance of supply and demand. According to the production capacity and consumption ratio of major domestic petrochemical products, the main raw materials are in a state of balance or shortage. There are large gaps in ethylene, polyethylene, polypropylene and ABS plastics. Synthetic fibers and rubber continue to be in excess. There is a serious surplus of product (see Figure 2).

Under the circumstance of low oil price, the number of new and planned projects in the domestic traditional oil and gas petrochemical industry has increased significantly in recent years, and even the direct cracking of crude oil to olefins has appeared. In the future, the refining capacity will continue to increase with the construction of refining and chemical integration projects. It is estimated that from 2020 to 2025, the new refining capacity nationwide will be about 1.6×108 t/a, and the total refining capacity will reach 10×108 t/a in 2025. Prominent. At present, in addition to reducing the processing load, the domestic oil refining industry continues to increase its efforts to convert chemicals and other small refining products, such as increasing the production of propylene, which also has an impact on the chemical market.

2. Under the global trade pattern, China will still import some petrochemical products

3. Diversification of feedstocks and technologies continues to drive the spanning development of the olefin industry

With the 65×104 t/a ethylene production capacity of Xinpu Chemical in 2019 and the 100×104 t/a ethylene production capacity of Panjin Bora in 2020 being completed and put into operation, in addition to CTO and MTO, China has added a new light hydrocarbon cracking feedstock route to produce ethylene. The trend of diversification is obvious. Around 2021, 5 sets of ethane and light hydrocarbon cracking to ethylene units, including 2 sets of ethane crackers in northwest China, will be put into operation. The total production capacity of such devices will reach 590×104 t/a. From the perspective of the ethylene process route, there will be new production capacity for direct cracking of wholly foreign-owned crude oil to olefins in the future. China's ethylene industry has entered a pattern of diversified development and competition. In 2019, China's ethylene production capacity reached 2884×104 t/a, of which the ethylene production capacity of the naphtha and light hydrocarbon cracking route was 2206×104 t/a (including the catalytic cracking ethylene production capacity of 60×104 t/a), and the ethylene production capacity of the MTO route was 2206×104 t/a. 678×104 t/a. It is estimated that China's ethylene production capacity will reach 3348×104 t/a and 5438×104 t/a in 2020 and 2025, respectively (see Figure 4).

Compared with ethylene, the raw material route of propylene is wider and the diversified development pattern is more complicated. In 2019, the propylene production capacity was 3989×104 t/a, of which MTP/MTO (methanol to propylene/methanol to olefins) and PDH production capacity were 1080×104 t/a and 635×104 t/a, accounting for 27% and 16%, respectively. %; The propylene production capacity of traditional refining and chemical industry is 2274×104 t/a, accounting for 57%. In 2020 and 2025, China's propylene production capacity is expected to reach 4690×104 t/a and 5971×104 t/a, respectively (see Figure 5).

4. The market share of traditional enterprises has declined, and the industrial structure has undergone profound changes

In terms of the industrial pattern of ethylene and propylene, the source of the chemical industry, the domestic olefin industry has formed a two major companies, China Petrochemical Corporation (Sinopec) and China National Petroleum Corporation (CNPC), with active participation of multiple capitals. Production competition pattern. From the perspective of participating entities, other state-owned enterprises, local capital, private enterprises and foreign capital have entered the field of ethylene production one after another. The share of Sinopec and PetroChina's ethylene capacity fell from 87% in 2011 to 62% in 2019, and the share of propylene capacity fell from 75% in 2011 to 43% in 2019.

Changes in the production pattern of olefins have caused changes in the downstream polyolefin market. For example, the polypropylene market is already competing for the best. In 2019, the production capacity share of Sinopec and PetroChina dropped to 26% and 15% respectively, and the production capacity share of China Shenhua increased to 9%. The share accounted for a total of 8%, and the other from local enterprises and coal chemical enterprises grew rapidly (see Figure 6).

As domestic private capital represented by Rongsheng, Hengli, Shenghong and international chemical giants such as ExxonMobil, Aramco, BASF, LyondellBasell have entered the Chinese petrochemical industry, Shenhua, Yanchang and Huajin have continued to expand. In the future, the proportion of production capacity of Sinopec and PetroChina will further decline. For example, the proportion of polyethylene production capacity will drop from 44% and 26% in 2019 to 34% and 22% in 2025 (see Figure 7).

5. The polyester industry has developed significantly from bottom to top, and the industry concentration has gradually increased

In recent years, manufacturers in the downstream of the industrial chain have become more and more determined to develop upstream. They have moved from small chemical products to high-threshold ethylene, PX and synthetic resin products. The concentration of the industrial chain has been continuously strengthened. The most obvious is polyester industry chain.

At present, the total domestic PX production capacity is 2219×104 t/a, with a total of 20 enterprises. Among them, there are 18 enterprises with supporting upstream, accounting for 95% of the national production capacity; 9 enterprises with supporting downstream, accounting for 60% of the national production capacity. The industrial chain is highly concentrated, and the market competition is extremely fierce. By 2025, leading polyester companies such as Hengli, Rongsheng, Hengyi, Tongkun and Xinfengming are developing towards PX and MEG (ethylene glycol), aiming to continue to expand the reinforced fiber industry chain and penetrate into the industry chain Upstream and downstream, further strengthen industrial concentration (see Figure 8).

The competition in China's petrochemical industry has fully spread, and the number of bankrupt companies has increased significantly. In 2018 and 2019, the number of chemical companies that declared bankruptcy in China was 189 and 342 respectively, and it is expected to be 320 in 2020. The domestic industry consolidation trend is obvious, and leading petrochemical companies are actively implementing mergers and acquisitions, such as Sinochem's acquisition of Luxi Chemical, and Jinfa Technology's acquisition of Haiyue.

To sum up, China's petrochemical market will maintain growth in the next ten years and enter the peak consumption stage. At the same time, the diversification of raw materials will promote the rapid growth of petrochemical production capacity, and the surplus will further increase. The cost competition pattern of the global petrochemical industry will be difficult to break in the short term, the industry competition will become more intense, and high-cost production capacity will be eliminated. The internal optimization and reorganization trend of Sinopec industry is obvious and will be in the stage of development and rebalancing. Full market competition will lay the foundation for Sinopec industry structure in the future.

Reflections on the Development of China's Petrochemical Industry

1. Domestic petrochemical enterprises should pay attention to the research and judgment of the development situation of the petrochemical industry, and clarify the development orientation and goals

Major domestic refining and chemical companies should strengthen their research and judgment on industry development laws and trends, formulate medium and long-term development strategies based on their own advantages, and determine construction directions and goals in different development stages. In the process of implementation, strengthen the analysis of domestic and foreign development environment, policy orientation and industry trends, comprehensively select the optimal layout of advantageous resources such as resources, market, technology, location and human resources, and promote the refining and chemical business to become more refined and stronger.

2. The technical route of refining and chemical integration still has vitality. While focusing on the “two legs of oil and chemical industry”, we should strengthen cooperation in block-based energy.

In the historical process of the development of China's petrochemical industry, with the changes in raw material prices and the innovation of technical routes, it has already caused an impact on traditional refining and chemical integrated production enterprises. However, after different raw material production routes lead to industry optimization and reorganization, they will always reach a balance in the competitive landscape centered on production costs. The refining and chemical integration technology route still has its vitality, especially in the period of low oil prices in recent years.

In order to strengthen the risk resistance against oil price fluctuations, some domestic refining and chemical integrated enterprises focus on the "two legs" of oil refining and chemical industry, but limited to the scale of the original equipment, only small adjustments can be made. Some new refining and chemical integration projects can be greatly adjusted in the three main product routes of refined oil, aromatic hydrocarbons and olefins according to the overall benefit maximization, and the profitability is outstanding.

Therefore, domestic refining and chemical enterprises should strengthen the research on block-based coordination and cooperation, such as mutual supply of raw materials, energy sharing of water, electricity, wind, etc., while carrying out the transformation of "oil conversion", so as to achieve the goal of concentrating resources and allocating energy consumption costs. The purpose is to further tap the competitive potential of refining and chemical integration.

3. Strengthen the vertical development of the industrial chain vertically, and focus on cross-field application research horizontally

As competition continues to intensify, it is difficult to develop in a certain link of the industry chain alone to resist the risks brought by market fluctuations. Therefore, in recent years, the trend of enterprises developing from downstream to upstream in the industry is very significant. Traditional refining and chemical integrated enterprises should attach great importance to this change, and strive to build a vertically integrated industrial chain through various channels such as industrial chain integration, joint ventures and cooperation.

At the same time, traditional refining and chemical integrated enterprises should give full play to their advantages in human resources, technology and capital, learn from international advanced enterprises such as DuPont and BASF, and strengthen horizontal and cross-disciplinary applied research, such as automobiles, electronic appliances, aerospace, etc. Material application, new material development and other directions. This is the only way for modern refining and chemical enterprises to strengthen product research and development, expand the depth and breadth of market consumption, and become the world's advanced material manufacturers.

4. Maintain an international perspective, focus on joint ventures and cooperation, seize opportunities for mergers and acquisitions, and break through local strategic development

At present, the global petrochemical industry is very competitive, and the cases and scale of industry mergers and acquisitions continue to rise. At the same time, China took the lead in recovering production and consumption from the epidemic, and its domestic industrial development and technological upgrading have gradually become successful, making it the most attractive country for investment. Domestic refining and chemical companies should maintain an international perspective, focus on companies that can agree with their own strategic development directions and goals, strengthen joint ventures and cooperation, seek mergers and acquisitions opportunities, obtain overseas strategic development fulcrums, and break through the limitations of local development to go international.

Source: Light Hydrocarbon Bar, Authors: Qu Liang, Wei Hangyu, Chen Huimin, Jiang Zilong (1. China National Petroleum Corporation Planning Institute; 2. PetroChina Co., Ltd. Refining and Chemical Branch), the original text was published in: "Petroleum Planning and Design, Issue 1, 2021.

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