【 Introduction 】 In the past five years, the supply and demand pattern of propylene glycol market in China has maintained a balanced state. Although the domestic propylene glycol supply is in excess, but basically through export to absorb the remaining output. In 2022, the domestic propylene glycol production capacity will increase, and the downstream demand will be weakened due to the decline of terminal real estate and other industries. Falling prices kept the export arbitrage window open, and the total volume of exports hit a five-year high. Due to lower prices, coupled with lower prices of dimethyl carbonate, the 2022 PO transesterification plant experienced a significant decline in profit. As the downstream demand for propylene glycol is the traditional industry, there is no new growth point. Under the background of shrinking profits, the plan of new production capacity in the later stage may be postponed. Capacity growth will slow down in the future.
Key data interpretation
The price of propylene glycol in Shandong fell 34.21% year on year
In 2022, the overall price of propylene glycol in China showed a downward trend. Taking Shandong market as an example, as of December 28, the price of propylene glycol in Shandong market was 7050 yuan/ton (acceptance factory, the same below), down by 9200 yuan/ton compared with the end of last year; The lowest price in the year was 6,900 yuan/ton, compared with the highest price of 17,500 yuan/ton, the price fluctuation range reached 10,600 yuan/ton; The average price in 2022 is 11,288 yuan per ton, down 34.83% compared with 2021.
The main driving factors affecting the price decline are: 1. The increase of domestic capacity and output. The domestic propylene glycol production capacity reached 605,400 tons/year, an increase of 35.92% over 2021; Production is expected to increase 22.28 percent year on year in 2022. 2. Lower downstream consumption. Affected by the downturn in the terminal real estate industry and other factors, the downstream operation of propylene glycol decreased, and it is estimated that the domestic consumption of propylene glycol decreased by about 4% compared with last year. 3. The price of propylene oxide, the main raw material, has fallen and the cost support has weakened. It is estimated that the comprehensive cost of PO transesterization method in 2022 will fall 27% compared with that in 2021.
Lower price of dimethyl carbonate in co-production lower profitability of the PO transesterification plant
2021 is a highlight year for the profit level of PO transesterification device. Although the price of raw materials is on the rise, the market price of propylene glycol and dimethyl carbonate is also on the rise, and the production profit reaches a record high, and even the profit of some periods can reach more than RMB yuan. Although the average profit in 2022 is still considerable, the profit change is gradually narrowing, and even the profit of the device is negative towards the end of the year.
In 2022, the price of dimethyl carbonate also fluctuated and fell mainly. Although the price of raw materials also fell, the decline of raw materials was less than that of propylene glycol and dimethyl carbonate, so the overall profit of PO transesterification device declined significantly. The 2022 PO transesterification consolidated average profit is expected to decline 32.17% from 2021.
Supply is up, capacity utilization is down
The production capacity of propylene glycol in 2022 increased significantly compared with that in 2021. Among them, a set of 40000 tons/year water legal device of Yueyang Changde in Hunan was added, and the capacity of new material device of Shenghua was increased to 100000 tons/year. In addition, Shandong Haike’s 80,000 tons/year PO transester process plant in Lianyungang (Jiangsu Sipai) was put into operation in late November, and the domestic propylene glycol production capacity reached 605,400 tons/year, an increase of 35.92% compared with 2021.
Although with the increase of production capacity, the output of propylene glycol will also increase in 2022. It is expected that the domestic output of propylene glycol will reach 451,700 tons in 2022, an increase of 22.28% year-on-year. However, output growth in 2022 was not as fast as capacity growth, and capacity utilization declined. It is expected that the utilization rate of propylene glycol capacity in China will be 74.61% in 2022, down 8.33 percentage points year-on-year. The main reasons for the decline in capacity utilization rate are weak domestic downstream demand, and the continuous decline in price makes the plant profit decline, and the factory production enthusiasm is inhibited. At the same time, Jiangsu Sipai equipment was put into operation in late November, which contributed less to the output.
The export volume increased significantly and is expected to rise 40.29% year on year
In the past 5 years, the export volume of propylene glycol in China basically showed an increasing trend year by year. The domestic propylene glycol production capacity is relatively excessive, and the domestic supply actively seeks new demand growth points. In terms of export, the domestic supply occupies an important position in the low-end demand market with its low price. After reaching a high of 139,000 tons in 2021, exports may continue to grow in 2022, with the total expected to reach 195,000 tons, an increase of 56,000 tons over 2021.
In 2022, domestic production capacity will increase, while domestic downstream demand will weaken. Exports will be needed to absorb more supplies to ease the supply pressure. At the same time, the domestic price is constantly falling and the price in the foreign market is high, which makes the arbitrage window open. In addition, some equipment maintenance in Europe and the United States caused supply shortage, which is good for China’s propylene glycol export. China’s propylene glycol export dependence is expected to be 43.8% in 2022, 6.2 percentage points higher than that in 2021.
Conclusion:
In 2023, it is expected that the domestic propylene glycol production capacity will still increase in a narrow range, while the domestic demand has no new growth point, and the domestic price is not expected to make a big breakthrough, mainly in the range fluctuation. High global energy prices are still expected to support the export market, and it is expected that China will still maintain a high dependence on propylene glycol export in 2023.