Liu Xinwei, Wang Ping, Sublime China Information

Rapid expansion in capacity

China’s ethylene glycol production capacity is still in a period of rapid expansion. According to SCI (Sublime China Information), China's ethylene glycol production capacity was 10.51 million tons in 2018, with a compound growth rate of 16.86% in the past 10 years. In recent years, with the vigorous development of the coal-to-glycol industry, the ethylene glycol production routes have become more diversified. By the end of 2018, the total capacity of integrated process (naphtha/ethylene route) was 5.39 million tons, accounting for 55.52%; the total capacity of MTO was 880 thousand tons, accounting for 9.06%; and the total capacity of coal to MEG was 3.44 million tons, accounting for 35.42%. In 2018, the country saw a total production of 6.69 million tons of ethylene glycol, up 19.2% YoY, and the utilization rate was around 64%. The effective capacity actually added was 1.7 million tons in the same year. By now, new capacities from Huizhou Refinery, Inner Mongolia Yigao, Qianxi Chemical, Hualu Hengsheng and Anhui Hong Sifang, have come onstream, totaling 1.7 million tons; new capacities of Xinjiang Tianye (Phase 3) and Xinjiang Tianying have been delayed (See Table 1 for details).

   Table 1  New ethylene glycol capacities in 2018

   Domestic ethylene glycol production facilities are concentrated in east China, north China, central China, and south China. The capacities in these four regions account for 84% of the country's total. Among them, east China's capacity is 4.01 million tons, accounting for 38% of the country's total; north China's capacity is 2.432 million tons, or 23% of the total; and central China's capacity is 1.48 million tons, or 14% of the total.

   Judging from the trends in monthly production, ethylene glycol production has obvious seasonal characteristics. From March to May, the output showed a downward trend, while from June to August, it showed a clear upward trend. The volatility of the ethylene glycol supply in 2018 was significantly stronger than in previous years.

Imports complement domestic demand gap

   In 2018, China imported a total of 9.7896 million tons of ethylene glycol, an increase of 1.0385 million tons and 11.9% YoY. These imports accounted for 59.6% of the total domestic supply. However, given the rapid expansion of domestic capacity, the import dependency of ethylene glycol is decreasing.

   The Middle East was China’s major ethylene glycol import supplier, and Saudi Arabia was the largest origin of imports, accounting for 41.58% of the total imports. Taiwan, Canada, Singapore and Oman ranked second to fifth, respectively, taking 10.07%, 9.27%, 7.69% and 7.44%. The top five regions in terms of imports accounted for 75% of China's total imports.

   The consumers of ethylene glycol imports were mainly located in Jiangsu, Zhejiang and Shanghai, and the imports of ethylene glycol entered China mainly via Nanjing Customs. In 2018, the proportion of ethylene glycol imports through Nanjing customs was 68.03%, and Ningbo Customs 15.11%.

“Roller coaster” of ethylene glycol inventory in 2018

   Polyester accounts for 91% of total ethylene glycol consumption, followed by unsaturated resin (3.81%), antifreeze (2.98%), and polyurethane (2.5%). From a regional perspective, domestic polyester is concentrated in east China, and Jiangsu, Zhejiang, and Fujian provinces accounted for more than 85% of domestic ethylene glycol consumption (See Chart 1 for details).

     Chart 1 China’s ethylene glycol supply structure

   In 2018, the port inventory volatility of ethylene glycol increased significantly, especially in east China, where it experienced a roller coaster-like fluctuation. Since the end of February, the inventory of major ports in east China has increased rapidly from the level of 500 000 tons to a peak of 980 000 tons in mid-May, mainly due to the impact of newly started capacities and rapidly decreasing market prices. From May to October, the port inventory showed a downward trend, but began to increase again in mid-October.

Greater potential for production increase in 2019

   China’s ethylene glycol capacity still has a large growth potential in 2019. Currently, ethylene glycol projects are concentrated in north China, northwest China and east China (as shown in Table 2). The newly added capacities are expected to be 2.64 million tons, with a growth of 26%. Domestic ethylene glycol capacity is expected to reach 13.152 million tons in 2019, but the total output is expected to remain around 7.75 million tons. The overall demand growth of the ethylene glycol will remain at 6%. It is hence estimated that the import volume of the ethylene glycol will be 10.42 million tons in 2019, and the import dependency will be above 60%. In 2019, the new polyester capacities are expected to reach 6.14 million tons. In view of the consumption pressure in 2019, more than 2 million tons of capacity will be postponed until 2020.  

       Table 2  China’s MEG projects during 2019-2020 (kt/a)