By Song Yang, www.oilchem.net

According to the statistics of aromatic-related products, such as p-xylene, benzene, toluene, xylene, and styrene, China's aromatics production accounts for more than 25% of the global total, and the regional consumption takes up over 30% of the global total.

China's aromatics industry has seen rapid development in recent years, especially from 2019 to 2023, with an annual compound growth rate of aromatics capacity reaching 22.16%. Thus, the total capacity exceeded 150 million t/a.

The growth of China's aromatics capacity will slow down significantly during 2024-2027, and the average annual growth rate is likely to drop to 4.43%. As the rapid expansion period is coming to an end, the industry development will shift to consumption fields. Accordingly, the differentiated application development of aromatics products in the oil segment and the chemical segment in early stages will become an important issue that the industry needs to face.

Differentiated performance of aromatics products in supply and demand fundamentals

With the rapid development of domestic capacity, the dependency on imported aromatics products has decreased significantly. Instead, the export trading of toluene and styrene has taken an infant shape, especially toluene, which turned into a net export product in 2022. This indicated that aromatics products applied in the oil segment are more and more oversupplied (see Figure 1 and Table 1).

Figure 1 Import dependency of aromatics products, 2018-2022

According to geographical distribution of capacity, Chinese refineries are concentrated in the eastern and southern coastal regions. Among them, Zhejiang, Shandong, and Liaoning see the most concentrated aromatics capacity, followed by Guangdong, Fujian, and Jiangsu. These regions are not only geographically convenient for securing imported crude oil for production, but also close to major consumption markets. The construction of new aromatics units favors coastal areas and big scale in recent years.

From the perspective of enterprises’ ownership, the proportion of capacity from domestic private/joint ventures and state-owned enterprises is nearly 1:1. As for new aromatics capacity in the past five years, over 60% has been big-sized aromatic complexes, which are generally superior compared with old state-owned old facilities in terms of production scale, downstream supporting units, and geographical location.

The capacity of old plants is concentrated in Northeast China and Northwest China, where consumption power is limited, while demand for aromatics in East China, a region with robust economic development, is too strong to be covered. This has generated a supply flow of aromatics from the north to the south and from inland to coastal areas. Jiangsu, Zhejiang, Shanghai, Shandong, and Fujian are the main net inflow regions for aromatic in China, while Liaoning and Hebei are the main net outflow regions.

Downstream consumption of aromatic products

Benzene’s major derivative has been styrene in the past five years, and the consumption of benzene in styrene sector increased from 41% in 2018 to 47% in 2022. The consumption from other derivatives was relatively flat (see Figure 2).

Figure 2 Benzene’s downstream distribution in China in 2018 and 2022

Private enterprises have joined state-owned peers in the construction of styrene plants in recent years due to the long-term shortage of styrene supply in China, considerable profits, and low market access, resulting in rapid growth of styrene capacity. Its three major derivatives - PS, EPS, and ABS, collectively known as the "three major S", account for 70% of the total styrene consumption in China (see Figure 3).

Figure 3 Styrene’s downstream distribution in China in 2018 and 2022

The downstream consumption of paraxylene (PX) has been flat in the past five years. Purified terephthalic acid (PTA) was the dominant derivative, and p-methylbenzoic acid was another derivative (see Figure 4).

Figure 4 PX’s downstream distribution in China in 2018 and 2022

More toluene and xylene have been processed into PX and benzene in aromatic complexes in recent years due to higher profits in the chemical sector. The growth rate of octane value application was slower than that of the chemical sector (see Figure 5 and Figure 6).

Figure 5 Toluene’s downstream distribution in China in 2018 and 2022

Figure 6 Xylene’s downstream distribution in China in 2018 and 2022

Future industry development

The start-up of CNOOC Huizhou’s Phase 2.5 plant in June 2023 signaled an end of the high-speed development period of China's new refining and chemical integration plants. The average growth rate of aromatics in China was 22.16% from 2019 to 2023, and the growth is expected to fall to 4.43% from 2024 to 2027. Since large-scale refining and chemical integration plants in China were completed and put into operation, the capacity expansion of aromatics will be mainly from by-products of cracking units. By 2027, only three aromatic complexes from Yulong Petrochemical, Huajin Aramco, and Gulei Petrochemical’s Phase II project will have been put into operation, so the growth of various aromatics capacity will slow down sharply. The capacity expansion of benzene, toluene and xylene will mainly rely on the construction of new ethylene and reforming units.

In terms of aromatics supply and demand balance, it is expected that the export volume of toluene will continue to increase, and the import dependency of benzene, styrene, and xylene will decrease year by year. However, the import dependency on PX will increase year by year as a result of robust demand from its downstream sectors (see Figure 7 and Table 2).

        Figure 7 Change of import dependency of aromatics products in China                       from  2023 to 2027

As for the future development of aromatics, the oversupply issue of styrene will be the biggest. It is expected that its derivatives will have difficulties in affording the supply gluts of styrene and styrene producers will have to increase exporting as an another way to solve the issue (see Figure 8).

Figure 8 Schematic diagram of future development of aromatics in China

It is less urgent for toluene to export than styrene. The start-up of CNOOC’s two disproportionation units reduced the exporting of toluene in 2023. Mixed aromatics have also been registered as one of the products for consumption tax levying since June 2023. In the future, mixed aromatics will tend to be processed into toluene and xylene, and hence the supply of toluene and xylene will increase.  

PX and benzene are relatively scarce among aromatics products. With a slowdown in the capacity expansion of domestic aromatic complexes, the supply mainly depends on the processing of mixed aromatics into toluene and xylene aforementioned and importing. In addition, coal-based benzene is also feasible to cover the domestic demand gap.