By Yang Jianyun, Sinopec Refinery Product Sales Co., Ltd.

Paraffin could be used to produce candles. Further, as a kind of chemical raw material, it is also widely used in many other industries like packaging, artificial boards, plastic processing, etc. China’s paraffin output approaches to one third of the world’s. In recent years, due to factors including substitutes, sluggish downstream industries, etc., domestic capacity and output of paraffin have both further concentrated in northeast China– a region enjoying advantage of crude oil resources– and apparent consumption of paraffin has declined after reaching a certain high in 2018.

Products and applications

Petroleum wax products include liquid paraffin, paraffin, microcrystalline wax, etc. More specifically, paraffin products include: 1) soap manufacturing paraffin used mainly to produce aliphatic acid and chlorinated paraffin; 2) crude paraffin mainly used in match making, artificial board and explosive industries; 3) paraffin used as food additives; 4) paraffin used in packaging industry; 5) semi-refined and fully-refined paraffin wax– enjoying good leakproofness, insulativity, plasticity and lubricity– consumed mainly by candle industry and meanwhile widely used in others areas of paper packaging materials, textiles, stationeries, etc.

Capacity, output, consumption and price

In China – a major paraffin producer and exporter in the world –two largest paraffin producers are CNPC, eight refineries of which manufacture paraffin and Sinopec Group having seven subsidiaries producing paraffin (See Table 1 for more details). Units under normal production of CNPC currently boast a combined capacity of 1.5 million t/a, and those of Sinopec Group 500 000 t/a. Further, a 100 000 t/a paraffin project of private firm Panjin North Asphalt Fuel Co., Ltd. was put into production in 2018, changing the situation that only CNPC and Sinopec Group could produce paraffin with crude oil.

CNPC’s paraffin capacity has increased in recent years, but Sinopec Group’s has decreased; capacity of northeast China has grown, while combined capacity from other regions has declined. Hence no big changes in domestic total paraffin capacity, which, however, has been excluding capacity, around 200 000 t/a, from enterprises utilizing cerate, foots oil or imported slack wax to produce paraffin.

Due to resource advantage, paraffin output of northeast China has soared. CNPC’s paraffin output was up 2% YoY and surged 70% from 2011 to 1.33 million tons in 2022, when output of Sinopec Group reached 238 000 tons, down 18% YoY and dropping more than 50% from 2011. See Table 2 for more details. China’s total paraffin output was down 3% YoY to 1.59 million tons in 2022, with exported paraffin accounting for more than 40%, or around 740 000 tons.

Apparent consumption of paraffin for 2022 reached 846 000 tons, up 10 000 tons YoY but down 67 000 tons from 2018. See Figure 1 for more details. Paraffin is widely used in many downstream industries (see Table 3 for details), with candle industry being the largest one, consumption proportion of which, showing an upward trend in recent years, fell in 2020 and 2022 because of the coronavirus. Demand from artificial board industry has dropped during 2017-2022, given the nation’s policies to crack down on property speculation, competition from substitute goods, etc.

Figure 1 China’s apparent consumption of paraffin from 2011 to 2022

Figure 2 shows factory price trend of a company’s No. 58 fully-refined paraffin from 2017 to 2022. Demand is key to paraffin prices, which are also impacted by economic environment. The gap between average selling prices of paraffin and crude oil prices could represent paraffin firms’economic benefits, relatively poor from 2018 to 2020 but much better during 2021-2022 (see Figure 3 for details).

    Figure 2 Factory price trend of a company’s No. 58 fully-refined paraffin from           2017 to 2022

  Figure 3 Gap between average selling prices of a company’s paraffin and crude        oil prices during 2017-2022

Market analysis

Domestic paraffin output has increased stably in recent years. However, apparent consumption has declined, probably attributable to substitute goods like Fischer-Tropsch wax–with almost no sulfur, nitrogen, aromatics and other impurities– widely used in the fields of candles, plastic processing, food packaging – a good substitute in many high-end areas. The number of domestic Fischer-Tropsch wax producers has increased to four since 2014, when Lu’an Group launched Fischer-Tropsch wax. China’s Fischer-Tropsch wax output skyrocketed from 7 200 tons in 2014 to nearly 320 000 tons in 2020, and exceeded 500 000 tons in 2021. Except in 2021, market prices of Fischer-Tropsch wax are around RMB1 000/t lower than paraffin prices. Hence a strong competitor.

Other mineral wax with low price could replace paraffin in areas such as candles and artificial boards. Import volume once exceeded 80 000 tons, nearly 10% of domestic apparent consumption of paraffin. In 2022, China imported 38 800 tons (see Figure 4 for details). In recent years, stearic acid has frequently replaced paraffin to produce candles, owing to foreign anti-dumping measures, environmental requirement, price advantage, etc. In the areas of plastic processing and textiles, stearic acid could also replace part of paraffin. Domestic capacity of stearic acid currently reaches around 1.3 million t/a, output around 800 000 tons and apparent consumption more than 1 million tons. However, stearic acid prices have been higher than paraffin prices since the end of 2019 due to rising costs. Hence, stearic acid could hardly be a substitute unless prices of its raw material palm oil could fall.

Figure 4 Other mineral wax import from 2009 to 2022, 10 kt

Besides candle industry, paraffin could be applied to many areas, e.g. cosmetics, rubber tires, etc. In recent years, demand from candle industry has fluctuated sharply, that from artificial board industry shrunk and that from other industries remained relatively stable. As China is a larger exporter of paraffin and candles, domestic paraffin market is directly influenced by international economic situations, exchange rates, China’s export policies and import policies of foreign countries.

Suggestions

Paraffin producers could calculate break-even point, and sales firms could price products properly after taking into account the break-even point mentioned above and state of operation of leading downstream enterprises. Further, paraffin producers should adjust production plans based on sales firms’ feedback on market demand. Domestic paraffin enterprises face intense competition. They are wise to develop medium and high-end products through cooperating with research institutions and universities.