FocusStrong toluene capacity boost in China to take toll on imports

22 September 2011 09:07  [Source: ICIS news]

By Mahua Chakravarty and Vivian Liu

SHANGHAI (ICIS)--China will have less need for imported toluene with about 2.7m tonnes/year of new domestic capacity coming on stream between the third quarter of this year and the whole of 2014, industry sources said on Thursday.

The figure is about three times as large as the 829,337 tonnes of toluene that China imported last year. The country is the largest market for the aromatics product in Asia.

The huge capacity increase in China from the second half of 2011 onwards, coupled with an expected decline in domestic demand from the downstream solvent sector amid fears of another global recession, could hit Asia's toluene exporters hard.

The country - the second biggest economy in the world - continues to grow at a much faster pace than western industrialised countries. But just like the rest of export-oriented economies in Asia, China is vulnerable to the financial and economic troubles in the US and the eurozone.

Fears that the world economy is teetering towards another recession continue to hound the commodities and equities markets.

China also has its own troubles in reining in inflation, with a series of government-imposed monetary tightening measures adversely affecting traders’ access to credits.

This cashflow problem is expected to persist in the country well into next year, killing appetite for trades, said an east-China based aromatics trader and distributor.

“Domestic end-users are asking for letters of credit for 60 to 90 days nowadays, which is a change from the more prompt payment mode seen earlier,” the trader added.

“We expect the cash flow problems to continue at least till the middle of 2012,” said a second trader based in south China.

Further on the demand front, prospects for any resurgence in toluene demand from the gasoline blending sector in China also look dim due to the ample availability and a preference for cheaper mixed aromatics as substitute, the trader said.

Blenders have recently switched to using mixed aromatics and MTBE as blendstocks, significantly pulling down demand for toluene.

For the other key aromatics products, the market outlook is less gloomy.

Benzene supply in China is likely to be balanced-to-tight in the next three to five years on the back of a slew of new downstream units expected to start production, said a major producer.

Supply of mixed xylenes and paraxylene (PX) in China is also expected to be tight in the next year or two, supported by a growing purified terephthalic acid (PTA) market, market source said.

Company	Location	Benzene (000 t/yr)	Toluene (000 t/yr)	MX (000 t/yr)	PX (000 t/yr)	Start-up
Jinlin PC	Jilin, Liaoning	110	350	270		Q2 2012
Daqing PC	Daqing, Liaoning	120	90	85		Q3 2012
Sinochem	Quanzhou, Fujian	250	280	500		2013
Dragon Special Resin (Xiamen)	Zhangzhou, Fujian	230	350	1000	800	2013-14
Petrochina Sichuan Petrochemical	Pengzhou, Sichuan	150	280	400	600	Q3 2013
Fushun PC	Fushun, Liaoning	160	120	110		Q4 2012
Sinopec Wuhan	Wuhan, Hubei	160	120	110		Q2 2013
Maoming Petrochemical	Maoming, Guangdong	200	150	700	600	2015
Hainan Refinery	Yangpu, Hainan	100	280	240	600	Q4 2013
Zhejiang Huachen Energy	Pinghu, Zhejiang	30	60	60		Q3 2011
PetroChina Taizhou	Taizhou, Zhejiang	134	150	1083		2013
PetroChina Jieyang	Jieyang, Guangdong	200	150	140		2013-2015
PetroChina & Rosneft	Tianjin	200	150	140		2013
Sinopec KPC	Zhanjiang, Guangdong	250	190	180		2015

Source: Chemease, an ICIS service in China

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By: Mahua Chakravarty
+65 6780 4359

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