Dozens of Chemical Giants Have Stopped Production!

Recently, Wanhua Chemical issued an announcement on the suspension of production and maintenance of its subsidiary’s plants, saying that according to the annual maintenance plan, the subsidiary’s MDI plant (350,000 tons/year) and TDI plant (250,000 tons/year) of the subsidiary Hungarian Bioside Chemical Co., Ltd. will be closed in 2022. On July 15, 2018, the production and maintenance were stopped one after another, and the maintenance is expected to take about 35 days.

A number of listed companies have announced the suspension of production, and the chemical production capacity of over 10 million tons has been "cleared"

Although the announcement mentioned that this move will not have an impact on the operation of the company, the interruption of the production capacity of the 600,000-ton plant of the chemical "one brother" for 35 days still caused ripples in the chemical market. Chemical workers are also thinking about whether they should follow the footsteps of "big brother" and stop slowly when orders are plummeting and costs are soaring. In fact, many chemical companies have already done this, with frequent shutdown and maintenance announcements, and tens of thousands of tons of production capacity are idle.

Tongde Chemical announced that in accordance with the spirit of the "Action Plan for Comprehensive Control of Air Pollution" and other documents issued by the local government, the company has eliminated the hot blast stove used in the production of silica products, and stopped the "production line with an annual output of 10,000 tons of silica products". . In the first half of the year, due to the impact of the epidemic, restrictions on the movement of people and delays in materials used in construction, it is expected that the trial run will be put into operation around the end of March 2023.

Bio-Chem announced that it plans to suspend the production lines of Phase I and Phase II of Songmudao Branch from July 1, 2022, and automate and upgrade some production equipment. It is expected to resume production in late August. The supplementary announcement disclosed by the company later made it clear that the time for this production shutdown and upgrading is expected to be about 1.5 months, and it is expected to reduce the output of industrial fungicides by about 3,000 tons.

Maohua Shihua: The 20,000-ton/year ethanolamine plant of Maoming Shihua Dongcheng Chemical Co., Ltd., a holding subsidiary, located in Maoming High-tech Industrial Development Zone, was unable to supply raw materials to the plant due to the sudden fire shutdown of the upstream raw material supplier. From June 9, the ethanolamine plant was temporarily shut down. The time for the resumption of production of the ethanolamine plant depends on the start-up time of upstream raw material suppliers and government notices, and the specific time has not yet been determined.

In addition, the shutdown and maintenance plans for companies in the chemical industry such as methanol, ethylene glycol, and PP have been implemented recently, involving a production capacity of over 10 million tons, and the industry operating rate is generally low.

In the caprolactam industry, due to the intensified production losses of enterprises, domestic manufacturers have gradually increased equipment maintenance or production reduction, and the market supply has tightened, and the overall start-up of the industry has dropped to about 70%. At present, Yang Coal is not quoting, and the load is 70%; Shenma's load is 70%; Sanning Orchid, the load is 80%, and the orchid inventory is slightly more, Sanning is not in stock, mainly for Changxie, and plans to overhaul in the near future; Dongming stops in the middle of the year; Qinghua plans Stopped in the middle of the year; Baling Petrochemical stopped recently; Juhua is under maintenance; Tianchen Yaolong's load has increased to 60%; Nanjing Dongfang's load is 80%.

In the PP industry, the number of installations overhauled in the first half of the year increased significantly, and many of them have overhauled plans throughout July, or the start-up restart time is yet to be determined. Among them, China Coal Yulin plans to start maintenance for 10-15 days from the beginning of July, and the driving time for many regions such as Northeast China, East China, and South China is currently to be determined.

In the urea industry, some plants in Inner Mongolia Boda, Jiangsu Linggu, Jilin Changshan, China Coal Ordos, Shandong Ruixing, Hualu, Shanxi Fengxi and other factories reduced production or overhauled at the end of June and early July, and the domestic daily output of urea declined. As of July 11, the daily output of the urea industry was 156,000 tons, a decrease of 9,100 tons from the end of June. It is reported that there are still factories scheduled for maintenance in Inner Mongolia in the near future, and the daily production of urea is expected to continue to decrease. There are nearly 10 companies that have maintenance plans in July. The maintenance time is spread throughout the first, middle and late days, and many of them have a maintenance cycle of more than half a month.

In the olefin industry, China Coal, Shaanxi Yulin, with an annual output of 600,000 tons of olefins and supporting 2 million tons of methanol, shut down for maintenance around July 4; /Year MTO is expected to be overhauled at the end of July (35 days of methanol plant shutdown and 45 days of methanol to olefin plant shutdown); Excelle’s 700,000-ton plant will be shut down for maintenance for 10-12 days from July 3; Yankuang Yulin’s 1.4 million-ton plant will be shut down on July 7. On the 2nd, the parking plan will be overhauled for 10 days. Nanjing Chengzhi's 600,000 t/a methanol plant was shut down for maintenance, and its first phase of 295,000 t/a MTO plant was overhauled and planned to restart in August.

In the PTA industry, in addition to Hong Kong, Hailun and Ningbo Yisheng currently under inspection, Fuhaichuang and Hengli Petrochemical plan to shut down for maintenance in July. At present, the PTA industry load is 77.5%, which is still at a low level in the same period in the past five years.

In the polyester industry, the three major polyester factories cut production by another 2.12 million tons in the first ten days of July. It is expected that in July, the supply pressure of polyester filament will not decrease, the average monthly operating load may be around 73.5%, and the output may be around 3.1 million tons. Under the combined effect of production reduction and promotion, the inventory of polyester filament factories in July may first rise and then fall, and it is expected that the inventory at the end of the month will be around 27 days.

Behind the shutdown and maintenance is the shutdown of production to reduce the burden, and "self-disciplined production reduction" has become the mainstream

According to incomplete statistics, dozens of chemical companies have started shutdowns for maintenance, and the affected production capacity has accumulated to more than 10 million tons, which can be said to have caused a huge shock in the industry. Although the chemical companies that stopped production and reduced production said that it would not have much impact, many companies announced together, and the market was not as light as everyone described. The shutdown and maintenance brought about a reduction in output and a reduction in load. Behind this is the crisis of the continuous decline in the operating rate of the chemical market.

Although the domestic epidemic has been basically brought under control, and all localities have basically resumed work and production since June, the expected "retaliatory" consumption has not appeared, some economic data is still declining, and market confidence needs to be restored. In the face of the current volatile market environment, downstream electronics, manufacturing and other industries are very cautious in purchasing. Even if the current chemical market price trend is basically locked in a slight downturn, it has not improved the indifference of the sudden drop in chemical plant orders.

Downstream sales were sluggish, work was suspended for holidays, midstream production and stockpiling lacked enthusiasm, and upstream was hard to see improvement. Some people call this phenomenon of downtime, maintenance and construction work as "self-disciplined production reduction", which is another way of saying market-based overcapacity reduction. Once the market is cold and the market downturn becomes the consensus in the industry, everyone will spontaneously reduce the burden and reduce production to avoid risks. Compared with the mandatory measures under the epidemic, this kind of self-disciplined shutdown obviously has more initiative, and it also reflects that more and more companies are beginning to face the cash flow losses caused by the continuous tightening of profits and the price reduction of chemical products. Intensified and other negative feedback, and began to appear "lying flat" mentality.

At present, the recovery of the macro economy is still relatively slow, and the overall atmosphere of the chemical market is relatively pessimistic. The situation of high inventory and low demand has made many coatings and chemical companies discouraged. Although many companies are still optimistic about the future, it is indeed difficult to predict when the expected large-scale replenishment and short supply will occur, and the idea of turning losses into profits is also difficult to implement. On the whole, the short-term chemical market may remain low. It runs in shock, and in the medium and long term, it will find a balance in a low-profit state.