More production projects limited consumption demand

Since the beginning of this year, affected by the novel coronavirus pneumonia epidemic, the international crude oil prices fell sharply, The bulk chemical market has also been affected to varying degrees. Taking organic raw material ethylene as an example, CFR Northeast Asia's price decline in the same period was about 10%, and the performance of "triene" products was more than medium, although less than the 4% drop in propylene market, but much better than the 66% drop in butadiene market.

Industry market analysis, ethylene performance is slightly stronger mainly due to tight supply and China's relatively strong demand. However, in the long run, with the continuous and rapid growth of new ethylene production capacity outside China, the global market supply is more adequate, and the Sino-US trade friction and the global epidemic continue to affect the growth of downstream demand, the contradiction between supply and demand will gradually appear, and the competition faced by the ethylene industry will become more and more fierce.

Rapid growth of production capacity

According to the statistics of Chemical Industry Online, the new production capacity of ethylene in the world exceeded 6 million tons in 2019, and the new increment was basically the same as that in 2018, mainly concentrated in the United States and China. In recent years, it is the ethylene plant concentrated production period brought about by the shale gas revolution in the United States, and the global ethylene production capacity has entered a stage of rapid growth.

In China, about 2.13 million tons of ethylene production capacity was added in 2019, an increase of 8% over the previous year and slightly higher than the growth rate in 2018. As the actual production capacity of the two large ethylene plants of Hengli Petrochemical and Zhejiang Petrochemical is released this year, and the large ethylene projects such as Baolai Petrochemical, Sinochem Quanzhou and Wanhua Chemical are expected to add more than 6 million tons of ethylene production capacity in China this year, and the supply pattern of ethylene in China will undergo great changes.

Impact of imported products

According to the data released by the National Bureau of Statistics, China's ethylene production in 2019 was 20.52 million tons, with an annual growth rate of 9.4%. And ethylene consumption in 2019 as high as more than 46 million tons, the annual growth rate of 6%, there is a supply gap of more than 25 million tons need to be imported through the way of ethylene and its derivatives, the situation of insufficient supply has not been effectively changed.

According to customs statistics, in 2019, China imported 2.22 million tons of ethylene, 14% less than the previous year, the import source countries are mainly South Korea, Japan and Singapore, the import volume accounted for 26%, 8% and 39% respectively. From the perspective of downstream polyethylene (PE) imports, high-density polyethylene (HDPE) imports reached 8 million tons in 2019, an increase of 17%; Linear low density polyethylene (LLDPE) imports reached 5.24 million tons, an increase of 20%. From January to April this year, China imported 580,000 tons of ethylene, down 39 percent year on year.

Industry analysis, the epidemic, external supply shortage and China's supply increase and other multi-impact effect began to show initially, resulting in China's ethylene imports reduced by nearly 40%. However, in the later period, with the improvement of the epidemic situation abroad, China's ethylene imports are expected to increase significantly, which will bring certain pressure to the Chinese market.

Limited consumer demand

From the perspective of ethylene consumption structure, PE accounted for about 64% in 2019, ethylene oxide/ethylene glycol accounted for about 18%, styrene accounted for about 8.5%. Among them, HDPE accounts for about 29% of the total consumption of ethylene, which continues to exceed the proportion of LLDPE of about 25%.

It is understood that China's HDPE is mainly used for thermoplastic molding processing, such as injection molding, extrusion, blow molding, etc., of which injection molding products are the largest consumer market; LLDPE is mainly used in film products, such as packaging and agricultural and other fields. Since the beginning of this year, due to the impact of the novel coronavirus epidemic and Sino-US trade frictions, the demand for PE should not grow very fast, coupled with the impact of more projects and imported products, the competition in the ethylene industry has intensified.