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China’s Next Target: Paraxylene Self-Sufficiency?

China, Company Strategy, Economics, Fibre Intermediates

One day a thing of the past

By John Richardson

ONLY a few years ago, people were discussing the great opportunities in purified terephthalic acid (PTA) as a globally traded product. I can remember confident talk of strong opportunities for export-based projects – especially, of course, projects that targeted the key China market.

And yet, remarkably, during the first day of the  2nd ICIS Asian PET and Polyester Conference, which is taking place in Singapore on 13-14 November, several delegates said that:

  • PTA will will mainly become a “local for local product” – i.e. international trade in the fibre intermediate will be greatly diminished.
  • Uncompetitive plants that were built to serve export markets will therefore face pressure to shut down.
  • Those plants that are based on imported paraxylene (PX) to make PTA which is then aimed at export markets will be especially vulnerable.
  • Driving this potential turnaround in markets is China, which is moving towards complete self-sufficiency in PTA.

The question would then become “what happens to PX?” Some delegates thought that it was only a matter of time before China became self-sufficient in PX also, whereas other attendees argued that China didn’t have the feedstock availability to achieve this.

“Refinery expansions in China are aimed at gasoline and diesel markets  rather than PX and, anyway, there is a great deal of what I would describe as irrational environmental pressure against PX capacity additions in China, But it doesn’t matter if it is irrational as sentiment counts,” said one delegate.

He was referring to  recent protests against new PX plants that have led to some projects being shelved.

But  China will do what suits China, and so it would be wrong to altogether rule out the possibility that one day it might also become self-sufficient in PX.

Here is how this might work:

  • Chinese investors take stakes in US shale gas fields and export condensates from these fields to China and/or US shale gas operators sell condensates to China on favourable terms. Condensates supply is, for the time being, very long in the US. These condensates can be split into heavy naphtha to be put through a reformer to make mixed xylenes and toluene – the feedstocks for PX.
  • This would mirror what is happening in methanol, where Chinese investors are taking stakes in methanol plants in the US. The methanol is scheduled to be shipped to coastal methanol-to-olefins projects in China.

Far-fetched and doesn’t make economic sense? Completely off the wall?

Maybe, but no chemicals or polymer is safe today from losing its position as an internationally traded product because of China’s determination to protect employment.

China might thus find other ways to achieve PX self-sufficiency.

Here is another suggestion. Perhaps this self-sufficiency will come via the methanol-to-PX process. Shanxi Coal Chemical Group and China Huadian Corp each have what we are told are “experimental plants” making PX from coal-based locally produced methanol.

We are told that this technology is yet to be proven and that it could be an expensive process.

But if this is the right strategic fit for China, this technology will be made to work.

And here’s the thing:

  • These methanol-to-PX plants are likely to be inland, near to coal mines that will supply them with their raw materials.
  • They might thus fall into the same category of coal-to-olefins (CTO) investments, which are viewed by the government as a means of creating jobs in China’s less developed provinces.

In the case of CTO, I am becoming more and more convinced that lots of these plants will be built – and will be run hard, regardless of their standard cost-per-tonne economics.

The global PX industry must, as a result, prepare a contingency plan for China becoming an ex-import market.