The Investment Exceeds 100 Billion! Wanhua, Rongsheng, and Sinopec Accelerate Their Layout and Grab the Market!

Ethylene investment heats up

Recently, Wanhua Chemical announced that it had recently received the approval from the Shandong Provincial Development and Reform Commission to build a 1.2 million ton/year ethylene and downstream high-end polyolefin project with a total investment of 17.6 billion yuan. In addition, on the evening of August 17, Rongsheng Petrochemical announced that its holding subsidiary Zhejiang Petrochemical Co., Ltd. plans to invest in the construction of an additional 1.4 million tons/year ethylene and downstream chemical plant projects, with an estimated total investment of 34.5 billion yuan.

In this regard, Cui Xiang, a researcher at China Research and PricewaterhouseCoopers, said in an interview with reporters that the purpose of the enterprise layout of the ethylene industry chain is various, but the core is inseparable from the market supply and demand relationship. In recent years, the scale of my country's ethylene market has continued to expand, and ethylene production has increased year by year. According to data from the National Bureau of Statistics, my country's ethylene production will increase by 5.2% year-on-year in 2020, and the growth rate will reach 30.8% in 2021. While the domestic production is growing rapidly, the foreign market is also constantly moving in. Under the influence of the new crown pneumonia epidemic, in order to ensure the stability of production, the new production mode of purchasing raw materials at the place of origin, and then locally producing ethylene has gradually emerged, thereby further expanding. the domestic production market.

An ethylene business person told reporters that in recent years, the demand for downstream polyethylene has continued to increase, and market policies have eliminated outdated production capacity. It is expected that there will be a large supply gap in the ethylene market in the future. At the same time, my country imports a large amount of ethylene produced in Japan, South Korea and other countries every year. In this context, large-scale chemical companies with strong capital are bound to quickly deploy the ethylene market.

There is still a gap between supply and demand

Ethylene is an important organic raw material for the petrochemical industry. The downstream consumption of ethylene is mainly used in the production of polyethylene (HDPE, LLDPE, LDPE) and ethylene oxide. In 2020, HDPE, LLDPE, LDPE and ethylene oxide accounted for 29.4%, 20.2% and 13.5% of the global ethylene consumption structure respectively and 15.3%. According to data from the National Bureau of Statistics, as of 2021, my country's ethylene production will reach 28.257 million tons, an increase of 6.657 million tons over 2020.

In recent years, with the advancement of supply-side structural reform and the basic completion of capacity reduction in the chemical industry, private ethylene integration projects have been launched, and the industry has entered a new round of capacity expansion.

On August 22, Wanhua Chemical announced that it had recently received an approval from the Shandong Provincial Development and Reform Commission to build a 1.2 million ton/year ethylene and downstream high-end polyolefin project. The project is located in Yantai Chemical Industrial Park, with a total investment of 17.6 billion yuan.

It is reported that the project is the second phase of Wanhua Chemical's ethylene production capacity. The first phase of Wanhua Chemical's ethylene project has been completed and put into operation in 2020, with a production capacity of 1 million tons. It is the first million-ton ethylene project in Shandong Province.

On the evening of August 17, Rongsheng Petrochemical announced that its holding subsidiary Zhejiang Petrochemical plans to invest 134.5 billion yuan in the construction of 1.4 million tons/year ethylene and downstream chemical plants.

On August 8, the social stability risk assessment of the 1.5 million t/a ethylene refining and chemical integration project in Sinopec Yueyang area was publicized for public comments. It is understood that the main construction contents of the project include the transformation of the existing 8 million tons/year atmospheric and vacuum expansion to 10 million tons/year, the new 3 million tons/year hydrocracking unit, and the new 1 million tons/year solvent deasphalting unit. , A new 60,000-ton/year sulfur recovery combined device, and supporting construction of storage and transportation facilities and public works, etc., the total investment of the project is 4.047 billion yuan.

In fact, since August 2022, Sinopec's multi-million-ton ethylene projects have been under construction in many places across the country, with a total production capacity of nearly 10 million tons.

Analyst Zhao Pengfei told reporters that under the circumstance that the demand for ethylene equivalent is large and there is still a gap between supply and demand, new integrated refining and chemical projects in recent years have ethylene and related downstream facilities. In 2021, global ethylene consumption will be 197.5 million tons, a year-on-year increase of 19%. From 2017 to 2021, the compound growth rate of global ethylene consumption will be 6%. The development of polyethylene industry is the main driving force driving the growth of global ethylene consumption.

The above-mentioned ethylene people also said that China is accelerating the elimination and withdrawal of ethylene plants below 300,000 tons per year, and there will soon be a large supply gap in the market in the future. At the same time, my country imports a large amount of ethylene produced in Japan, South Korea and other countries every year.

On February 11, the National Development and Reform Commission, the Ministry of Industry and Information Technology and other four departments jointly issued the "Notice on the Implementation Guidelines for Energy-Saving and Carbon-Reduction Transformation and Upgrading in Key Fields of High Energy-consuming Industries", pointing out that the ethylene industry will accelerate the phase-out and withdrawal of units below 300,000 tons/year, and by 2025, The ratio of benchmark production capacity in the ethylene industry has reached more than 30%. In addition, according to relevant policies, the ethylene plant whose energy efficiency level is below the benchmark value and cannot reach above the benchmark value through energy-saving renovation will be phased out at an accelerated pace.

According to customs data, as of 2021, the import volume of ethylene was 2.07 million tons, a year-on-year increase of 4.55%; the import value was 2.187 billion US dollars, a year-on-year increase of 50.72%.

Cui Xiang analyzed that in the relevant planning, small-scale backward production capacity will be replaced and transformed, which will also free up more market space for subsequent large-scale production projects. Under this circumstance, large chemical companies have launched projects related to the ethylene industry chain in order to seize the market and improve their industrial structure.

Intensification is gradually increasing

At present, my country's ethylene production route is mainly based on naphtha cracking, accounting for about 72.7%; CTO/MTO process accounts for about 20.7%. Ethane cracking to ethylene (including mixed alkane cracking), heavy oil catalytic thermal cracking to olefins, crude oil direct cracking to olefins, ethanol dehydration to ethylene and other technologies have all been industrialized, and ethylene raw materials have shown a light, diversified and integrated development. trend.

Wanhua Chemical's 1.2 million tons/year ethylene and downstream high-end polyolefin projects mainly include: 1.2 million tons/year ethylene cracker, 250,000 tons/year low density polyethylene (LDPE) unit, 2×200,000 tons/year polyolefin Elastomer (POE) unit, 200,000 tons/year butadiene unit, 550,000 tons/year pyrolysis gasoline hydrogenation unit (including 30,000 tons/year styrene extraction), 400,000 tons/year aromatics extraction unit and Supporting auxiliary works and public facilities.

According to public information, Wanhua Chemical's ethylene cracking project adopts the most advanced technology in the world and the environmental protection PO/SM technology independently developed by Wanhua to create a high-level domestic ethylene industry chain, fill the domestic gap, and break the foreign monopoly. At the same time, the construction of Wanhua Chemical's ethylene project is conducive to improving the integration of the polyurethane industry chain in Wanhua Yantai Industrial Park, and is conducive to solving the raw materials ethylene oxide and propylene oxide required in the production process of polyether polyol in the industrial park, and can consume HCL, a by-product of the isocyanate industry chain, promotes the balanced development of the industry.

Zhao Pengfei said that in recent years, affected by the global new crown pneumonia epidemic, the market demand for ethylene derivatives has been weak, but technological innovations are still promoting the vigorous development of the ethylene industry. The production capacity of new plants is above one million tons, and the investment in new processes is low, the cost is reduced, and the yield is increased, which will promote the upgrading or elimination of old plants. In the future, there will be obvious changes in the source of raw materials for domestic ethylene, that is, the process of producing ethylene from coal/methanol will gradually shrink in the proportion of raw materials, and the processes of lightening raw materials such as ethane cracking and light hydrocarbon cracking will be prepared. Favored; in addition, the oil head ethylene plant, which accounts for the largest proportion, will basically be converted into an integrated device, and the advantages in terms of cost may be fully utilized. The downstream supporting facilities of the newly built ethylene plant have also begun to develop towards differentiation, high-end and functionalization. The industrial chain of large-scale refining and chemical enterprises tends to be complete, the product variety is rich, the added value is increased, and the competitive advantage will become more and more obvious.

Kaiyuan Securities said that Wanhua Chemical's 1.2 million tons/year ethylene phase II project was approved, and its integration advantages have been enhanced.

In addition, the reporter noticed that in October 2021, the National Development and Reform Commission and other departments issued the Action Plan for Strict Energy Efficiency Constraints in Key Petrochemical and Chemical Industries to Promote Energy Conservation and Carbon Reduction (2021-2025), which requires that by 2025, through the implementation of energy conservation and carbon reduction actions, The proportion of production capacity with energy consumption of petroleum-based ethylene reaching the benchmark level (590 kg standard oil/ton) exceeds 30%, the carbon emission intensity is significantly reduced, and the green and low-carbon development capacity is significantly enhanced. Promote technologies such as one-step synthesis of olefins from syngas, direct cracking of crude oil to ethylene, design and manufacturing technologies for large-scale ethylene cracking furnaces, compressors, and high-efficiency heat exchangers, preparation technologies for special catalysts and additives, and autonomous intelligent control systems.

Sinopec has mastered the low-carbon technology of crude oil steam cracking to produce ethylene, and Sinopec plans to use crude steam cracking technology to directly produce ethylene to build a million-ton ethylene project. In November 2021, Sinopec's crude oil catalytic cracking direct-to-ethylene technology achieved the world's first industrial application.

It is understood that crude oil steam cracking to ethylene directly converts crude oil into chemicals such as ethylene and propylene, which will greatly shorten the production process, reduce production costs, and greatly reduce energy consumption and carbon emissions.

In this regard, Cui Xiang said that the update of production technology, the expansion of market scale, the transformation and upgrading of the industry, and the application of new production technology will further intensify the competition in the domestic ethylene market. At present, my country's ethylene industry still has problems such as low degree of intensive development and insufficient industrial clustering.

"The future development of the industry is mainly reflected in the substantial increase in the level of scale of the ethylene industry, the more obvious trend of light-weight, low-carbon and high-quality raw material structure. The device will be eliminated and withdrawn." Cui Xiang believes that it is foreseeable that the intensification of the ethylene industry will gradually increase in the future, and in this process, the intensity of market competition will be further intensified.

Profit upside down in the first half of the year

Under the high oil price this year, the world ethylene price will remain high and fluctuated, the recovery of world demand for chemical products is expected to slow down, the growth rate of ethylene demand will slow down, and the average operating rate of ethylene plants will remain at around 86%. Ethylene profitability continues to be under pressure against the backdrop of high costs and slowing demand.

Cui Xiang said that under the combined effect of multiple factors, the market price of ethylene rose first and then fell in the short term, and there were certain differences in the profitability of ethylene at different times. In the first half of 2022, under the influence of various factors such as the situation in Ukraine, rising energy prices, and the new crown pneumonia epidemic, the price of ethylene was inevitably affected. In the first quarter, driven by the favorable factors of the maintenance season in Northeast Asia, the price showed a wide range. However, due to the sluggish performance of my country's downstream consumer demand for ethylene and the lower-than-expected construction of the infrastructure industry, the overall price of the industry chain has fallen, and the cost side has suffered serious losses. Negative price reduction has also become the norm in the industry.

Cui Xiang mentioned that taking naphtha cracking to produce ethylene as an example, in the monthly ethylene production process, the profit is 186.5 yuan per ton when the profit is the best, and the loss per ton is 215.25 yuan when the profit is the worst. , but overall, in the first half of the year, the average loss of one ton of ethylene was 46.19 yuan.

Zhao Pengfei also said that in the first half of this year, the overall price of ethylene showed a trend of rising and falling. Affected by the global economic environment and the COVID-19 epidemic, the demand for ethylene and its downstream products was lower than expected, the product prices fluctuated sharply, and the profitability of the industry chain was not satisfactory.

The reporter noticed that in the first half of this year, Wanhua Chemical achieved a revenue of 89.1 billion yuan, a year-on-year increase of 31.7%, and a net profit of 10.3 billion yuan, a year-on-year decrease of 23.2%.

In this regard, Wanhua Chemical stated that due to the sharp rise in the prices of basic energy such as crude oil, natural gas and coal, its main chemical raw materials and energy costs of European BC companies have increased significantly, and the gross profit margin of major products has decreased year-on-year.

However, Zhao Pengfei said that although the growth rate of ethylene equivalent demand has declined with the increase of the production capacity base and the slowdown of economic growth, the market potential is still very large.