Behind the Turnaround of PX (Paraxylene): the Release of Domestic Production Capacity and the Reduction of Import Dependence

After a long period of losses, the PX (paraxylene) industry has finally turned losses into profits.

"In recent years, the profits of PX production have fluctuated greatly. Before 2019, PX companies basically maintained a high profit state, but from the second half of 2019 to 2021, it turned into a continuous loss situation." Jinlianchuang analyst Bian Chenhui told "Business in China" The reporter said that since the beginning of this year, the fundamentals of PX have been relatively optimistic, and the market has continued to strengthen. After reaching the break-even critical point in April, profits gradually increased in May.

The reporter noticed that with the expansion of the industrial chain of large-scale petrochemical private enterprise giants such as Hengli Petrochemical (600346.SH), Zhejiang Petrochemical and Shenghong Group, the domestic PX production capacity has grown rapidly in recent years.

Bian Chenhui said in an interview with reporters that in recent years, with the opening of my country's policies and the improvement of production technology, the domestic PX production has continued to increase and the international status has been continuously improved, which has weakened import dependence year by year. In 2021, my country's PX import volume and import dependence will further decrease. This year, my country's PX imports are about 13.65 million tons, and the import dependence has dropped to 38.36%.

Turn a loss into a profit

PX is an important petrochemical product connecting oil refining and chemical industry. It is not only one of the most important products in aromatics, but also the leading raw material of polyester industry. The downstream of PX is mainly used to produce PTA and PET, and finally used to produce clothes, beverage bottles, edible oil bottles, etc. In industrial applications, PX is mainly used for the production of polyester fibers and resins, coatings, dyes, and is widely used in the production of spices, medicines, pesticides, inks, adhesives and other fields.

The reporter noticed that in recent years, the import volume of PX has always been "one of the best" in the whole chemical products. Before 2018, my country's PX imports basically showed a steady increase year by year, and continued to hit a new high. Due to the rapid development of the downstream PTA industry, the demand for PX continues to increase, but due to the slow release of production capacity, it is necessary to rely on imports to make up for the supply gap. Therefore, in 2018, my country's PX imports reached the highest level in history, and the import dependence was even as high as 61%.

Since 2019, my country's PX production capacity has entered a period of rapid growth. That year, private refining and chemical integration projects such as Hengli Petrochemical, Zhejiang Petrochemical and Shenghong Group were put into operation.

With the continuous release of new domestic PX production capacity, the supply continues to grow. At the same time, affected by unfavorable factors such as weak market demand and fluctuations in the cost of crude oil, its prices began to decline.

Statistics show that in 2019, the price trend of the domestic PX market fell sharply. The average price at the beginning of the year was 8,500 CNY/ton, and the average price at the end of the year was 6,700 CNY/ton, with an annual decline of 21.18%. Since then, the PX market has entered a state of loss in 2020, which will continue until April 2022.

Under the low-efficiency operation for many years, the enthusiasm for starting the PX factory has been frustrated, and the supply has remained tight.

Founder's mid-term futures research report shows that in terms of domestic PX supply, Hainan Refinery's 1 million-ton unit was planned to open in mid-May this year, but it has been postponed to mid-June; Luoyang Petrochemical's 225,000-ton unit is running at 70% capacity, Tianjin Petrochemical's 28 Ninety percent of the 10,000-ton plant runs at full load. In terms of PX supply in Asia, Japan's Eneos Kashima 680,000-ton unit is scheduled to be overhauled for three months from May, and the SKGC/JX 1 million-ton unit is scheduled to be overhauled for one month from May.

Under the tight supply situation, the PX market profit has gradually increased.

According to the analysis of Jinlianchuang, since the beginning of this year, using naphtha as raw material to produce PX, the lowest profit is -132.73 US dollars / ton on March 7, and the highest profit is the current 148.4 US dollars / ton, which means that the start of March Losses gradually narrowed, hovering near the cost line in April, and profits rose sharply in May.

Bian Chenhui told reporters that the main reason is that the demand for oil transfer in the United States is good, the load of local aromatics units is low, and the import of PX from Southeast Asia into the US market has led to tight supply in the Asian market, and the price of PX has been rising all the way, while the performance of naphtha since April Weak shocks, the naphtha-PX spread continued to widen, and profits improved significantly.

At the same time, Bian Chenhui said that although the PX market is strong and profits continue to increase, there is not much room for industry profits to continue to improve. The main reason for the low load of foreign PX devices is production losses. Today, PX profits have improved significantly, and there is room for improvement in plant load. Especially, several sets of plants under maintenance in China have been restarted one after another, and the supply will be greatly increased in the later period. The tension will soon improve, and profits will gradually return to a reasonable level.

Breaking the monopoly

In fact, the global PX industry has been developing for more than 30 years. It was first dominated by the European and American markets, and then the production capacity of Japan and South Korea rose.

Since 2010, my country's downstream polyester market has developed rapidly, and PTA has added more production capacity. However, the construction of PX has always been slow, and the production capacity cannot meet the demand. The degree is as high as more than 60%.

In 2019, in order to break the monopoly of foreign products and enhance the international voice of my country's petrochemical industry, private petrochemical enterprises represented by Hengli Petrochemical, Zhejiang Petrochemical and Shenghong Group began to introduce and absorb advanced technologies to build refining and chemical integration projects. This also marks that the domestic polyester giant has truly entered a new stage of operation and a new development cycle of integrated operation of the entire industry chain of polyester, petrochemical and refining.

On March 24, 2019, Hengli Petrochemical's 20 million tons/year refining and chemical integration project was put into operation. In this project, the PX production capacity is 4.5 million tons. On December 31, 2019, the first phase of Zhejiang Petrochemical's 40 million tons/year refining and chemical integration project 20 million tons/year oil refining, 4 million tons/year PX aromatics, 1.4 million tons/year ethylene and downstream chemical units fully completed the feeding Test run, and successfully produced 15 kinds of qualified refining and chemical products such as PX and naphtha.

Hengli Petrochemical said that in 2019, Hengli Petrochemical's 20 million tons/year refining and chemical integration project has been fully put into operation, realizing the company's strategic breakthrough in the key production capacity links of refining and aromatics, and the company has become the first company in the industry to have An enterprise integrating the "crude oil-PX-PTA-polyester" industrial chain, the company continues to introduce world-class production equipment and mature process package technology, digest, absorb and utilize it, and continuously carry out technological innovation and improvement. The upper, middle and lower reaches of the entire industry chain have been laid out with a high-quality and efficient production capacity structure characterized by "large-scale installations, large-scale production capacity, structural integration, advanced technology, green environmental protection, and complete supporting facilities".

Jinlianchuang's analysis believes that in 2022, my country will have 6 sets of PX units planned to be put into operation, with a total production capacity of 11.89 million tons/year. If all can be put into operation on schedule, the PX production capacity is expected to increase by 41.3%, and China's PX production capacity will reach 40.705 million. tons/year. In addition, Zhejiang Petrochemical has obtained crude oil quota, its PX unit will maintain high-load operation, and domestic PX production will increase significantly. Since new units are generally equipped with downstream PTA units, most of which are self-supplied within the group, and there is almost no new capacity increase abroad, so next year China's PX imports are still showing a decreasing trend. According to the calculation of the new plant's commissioning time and operating rate, it is estimated that in 2022, the PX production will be about 30 million tons, the import volume will be about 9.5 million tons, and the supply will be about 39.5 million tons.

Bian Chenhui told reporters that it is expected that the production of domestic PX will increase significantly in the future. He said that since 2019, the import volume of PX has dropped year by year. With the rise of large domestic refining and chemical projects, the production capacity of PX has increased rapidly. The early PX was very profitable, and my country is a big clothing producer, and a lot of profits were given to Japan and South Korea and other big PX exporters, and the final production of clothing was basically paid by Chinese consumers, so it is imperative to reduce import dependence. In 2021, the import volume of PX and the degree of import dependence will further decrease. It is estimated that China's PX import volume will be about 13.65 million tons this year, and the import dependence will drop to about 38.36%.