By Xiang Feifei, Oilchem China
A slow-down in capacity expansion
China’s polycarbonate (PC) capacity has expanded from oversupply to overcapacity over the past 5 years, with a corresponding decline in industry prosperity. Starting from 2023, the growth of PC capacity in China slows down, with a yearly capacity of 230 000 t/a added coming mainly from Wanhua Chemical Group Co., Ltd. and Lihuayi Weiyuan Chemical Co., Ltd., up 9.38% from the last year while substantially lower than the previous 5 years (See Figure 1). Meanwhile, the capacity of raw materials in upstream goes up greatly with PC cost plunging as PC progresses towards the integration in China, backing up an obvious turnaround in profitability.
Figure 1 Changes statistics of China’s PC capacity from 2018 to 2023
PC capacity has been surging since 2018, ensuing an upsurge in domestic PC capacity in the next few years. By the end of 2022, total domestic capacity reached 3 200 000 t/a, increasing 153.97% from 2018, with a compound annual growth of 26.42%.
China’s PC capacity expansion was spotty from 2018 to 2022, showing up a rapid growth overall. It is the first year that China increased PC capacity sharply in 2018, with a new capacity of 385 000 t/a, gaining 44% year-on-year. Between 2019 and 2020, 4 production enterprises successively put PC equipment into production, including Zhonglan Guosu New Materials Technology Co., Ltd., Hubei Ganning Petrochemical New Material Co., Ltd., Shengtong Juyuan New Material Co., Ltd., and Cangzhou Dahua Group Co., Ltd. In addition, Luxi Chemical Co., Ltd. and Covestro, and Wanhua Chemical Group Co., Ltd. have expanded capacity to 100 000 t/a, 50 000 t/a, and 140 000 t/a respectively, with domestic PC capacity keeping booming. China's PC capacity expansion reached a high level in 2021 and 2022, with a year-over-year growth of 33.51% and 29.55% respectively, which was due to the launch of 520 000 t/a from Zhejiang Petrochemical, 260 000 t/a from Sinopec Sabic Tianjin Petrochemical Co., Ltd., 260 000 t/a from Hainan Huasheng Co., Ltd., 10 000 t/a from China Pingmei Shenma Co., Ltd., and PC equipment was launched with a capacity of 130 000 t/a in Wanhua Chemical Co., Ltd .
Obvious improvement in industry profits
Judging from the profit comparison of PC industry over 2 years (See Figure 2), bisphenol A profits have shrunk sharply while PC earnings have grown conversely, both of which had a visible profits gap. In particular, after Nov 2022, monthly gross profit of PC started to get out of the red. However, bisphenol A has still grappled to make money, with profits lower than PC’s.
Figure 2 Profits comparison of PC industry chains
A dramatic increase in output and start-up operation
Based on domestic PC capacity utilization and variable outputs in the past 3 years, despite increasing output, sluggish annual capacity utilization, caused by new capacity put into the production and low profits, demonstrated only 52.63% and 55.63% (See Figure 3) against the backdrop of domestic PC capacity expansion between 2021 and 2022. However, from Jan to Feb in 2023, domestic monthly PC output exceeded 200 000 tons, with average capacity utilization reaching an all-time high of 67.12% during the last three years.
Figure 3 Statistics of domestic PC output and capacity utilization
Obviously, PC capacity expansion slows down from 2023 in China. In the next 5 years, less than 2 000 000 t/a of additional PC capacity will be put into production. And domestic PC capacity utilization will rise as a result of stable operation of domestic equipment, increasing quality and downstream demand and substitutes of the imported products. In comparison to prior years, PC cost decreased due to a significant increase in the raw material capacity in upstream. As a result, the supply price of raw materials in the upstream will be constrained by the price of downstream PC products. Domestic PC profits are expected to be enhanced in the next few years.
