INSIGHT: China IPA market moves towards self-sufficiency

27 November 2012 11:03  [Source: ICIS news]

By Yeow Pei Lin

SINGAPORE (ICIS)--The isopropanol (IPA) market in Asia is expected to become more competitive in 2013 as the increase in regional supply outpaces demand growth.

Five projects with a combined nameplate capacity of 340,000 tonnes/year are scheduled for completion between the fourth quarter of 2012 and 2013, a survey by ICIS pricing and Chemease, a service of ICIS, shows (see IPA Projects table below).

More than 65% of the planned supply will come from plants in China, which is the largest market in Asia.

If all the new plants start up as scheduled, regional producers are likely to face another tough year, market sources said.

A number of Asian IPA producers have been struggling with low margins in 2012 as the demand for imports in the leading China market has slowed amid rising domestic capacity and weak downstream operating conditions.

Shipments into China totalled around 61,000 tonnes in the first nine months of 2012, down by 10.23% compared with the same period a year ago, according to China customs data.

In 2011, imports had similarly contracted by 15.25% from the previous year to 100,000 tonnes, official statistics showed.

The drop in imports in recent years has been accompanied by a corresponding rise in domestic IPA production. 

Exporters to China faced competition from new Chinese entrants. They include Yancheng Super Chemical that started operating a 50,000 tonne/year plant in Jiangsu province in October 2011, and Jiande Xinhua Chemical, which commenced production at its 100,000 tonne/year IPA/isopropylamine swing plant in 2010.

More recently, in October 2012 another Chinese producer Dezhou Detian Chemical expanded its capacity by bringing on-stream a 50,000 tonne/year acetone-based unit in Shandong province, while mothballing its older 10,000 tonne/year unit.

Next year, Yancheng Super Chemical and Taiwan’s Chang Chun Plastics will add a total of 180,000 tonnes to China’s annual IPA production capability, which is at an estimated 340,000 tonnes/year currently.

With the domestic IPA consumption tipped by some market participants to grow by just 2-3% in 2013, China is likely to continue to cut imports further while increasing exports.

Several Chinese distributors and traders who have downsized their import business in 2012 said they plan to source for product exclusively from domestic producers next year.

“There will be too much supply in China. We will not be able to make much money from imports. If we are not careful, we may even up making losses.

“We are better off buying domestic product or putting our funds in other more profitable petrochemical products,’’ a trader said.

The rising supply is likely to push Chinese producers to look beyond the domestic market for their IPA sales.

One such supplier has already started to seek long-term customers in southeast Asia ahead of a planned plant expansion in 2013.

But the Chinese sellers are likely to encounter strong competition from other northeast Asian producers, some of whom will also have to find new outlets for their new supplies next year in an increasingly crowded market.

Around 110,000 tonnes/year of new IPA capacity will come on-stream in South Korea and Japan by the second quarter of 2013.

South Korea’s LG Chem started up its 50,000 tonne/year acetone-based IPA line this November and the plant in Yeosu is expected to reach full capacity by January 2013.

Japanese producer Mitsui Chemicals is scheduled to complete its expansion by April next year. It is building an acetone-based facility of 60,000 tonnes/year to replace an existing 28,000 tonne/year unit that uses propylene, which is usually a higher-cost feedstock in Asia.

In view of the falling Chinese import demand and rising regional capacity, several northeast Asian producers said they plan to grow their existing markets in southeast Asia, as well as develop new customer base in India, the Middle East and the US.

Some are focusing on producing higher-quality IPA that can be used to clean electronics components such as printed circuit boards.

The more sanguine market participants said the supply glut may not be as bad as some have expected.

“Some of the new facilities may not be able to obtain sufficient competitively-priced acetone to operate their units fully,’’ a trader said.

In addition, the rise in Asian supply is likely to be offset by a decline in arbitrage cargoes, market sources said. 

Some US producers may exit or reduce their business in Asia where margins are likely to be weak because of ample supply, they said.

IPA Projects

Company

Location

Capacity (tonnes/year)

Feedstock

Start-up Schedule

Dezhou Detian Chemical*

Dezhou, Shandong province, China

50,000

Acetone

October 2012

LG Chem

Yeosu, South Korea

50,000

Acetone

Nov 2012

Mitsui Chemicals#

Osaka, Japan

60,000

Acetone

By April 2013

Chang Chun Plastics

Panjin, Liaoning province, China

80,000

Acetone

2013

Yancheng Super Chemical

Wei Fang, Shandong province, China

100,000

Acetone

2013

Total

 

340,000

 

 

* Existing 10,000 tonne/year acetone-based unit at same site has shut following the start up of new facility.

# Existing 28,000 tonne/year propylene-based unit at same site to shut when new plant comes on stream.

Read Paul Hodges’ Chemicals and the Economy blog
Bookmark John Richardson and Malini Hariharan’s Asian Chemical Connections blog


By: Yeow Pei Lin



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