12:00 PM | April 6, 2020 | Mark Thomas
The slowing of China’s p-xylene demand due to the pandemic is relatively less than oil, says Shi, downstream associate director/China market. “However, p-xylene imports had already started a declining trend since last year, as China becomes more self-sufficient,” she says.
Shi, in a presentation on the impact of Chinese mega-refineries on the fuels and petrochemical markets at the IHS Markit World Petrochemical Conference 2020 Online, which began Friday, highlighted that p-xylene capacities added during 2019 and 2020 in mainland China had exceeded demand growth and resulted in lower utilization. Live WPC 2020 Online Forums will take place 7–8 April and 15–16 April.
A combination of the capacity additions, the COVID-19 outbreak’s impact on downstream demand, and higher inventory levels means that IHS Markit “expects that China’s p-xylene imports will be continuously subdued for the remainder of the year,” Shi says. In the IHS Markit base case scenario, however, mainland China is still expected to require millions of metric tons of p-xylene to be imported by 2024, she says. This includes the assumption that not all the announced new p-xylene capacity in China will be built on time, she adds.
“The p-xylene market will face the pain of a large capacity overhang, but China will remain an importer, and the good news is that it will grow over time because of demand,” says Shi.
Oil demand in China will fare less well, with IHS Markit projecting that the COVID-19 pandemic will cut the country’s 2020 oil demand by 480,000 b/d compared with 2019, “which will pose a big challenge for the less competitive capacities,” Shi notes. There are already signs of refining consolidation in China, with the Shendong provincial government in February announcing it would start work to close down four refineries this year, according to Shi. “Shendong is home to a lot of small independent ‘teapot’ refiners. This move by the local government suggests there is a degree of possibility that independent rationalization will start as soon as this year, though there are still a lot of uncertainties associated with the development of the virus outbreak,” Shi says.
The new breed of mega-refineries either operating, such as the giant Hengli complex, or due to be commissioned soon means China’s total refining capacity is expected to reach around 18 million b/d by late 2023, with the overall share held by independent refiners rising from 23% at present to 29%. This rise is being driven by the new private enterprise mega-refineries, with approximately 60% of the country’s additional processing capacity over the next four years contributed by the Hengli, Rongsheng Phase 1, Rongsheng Phase 2, and Shenghong mega-refineries, Shi adds. Hengli and Rongsheng 1 are already in operation, with Shenghong and Rongsheng 2 scheduled to begin operations in 2022 and 2023, respectively.