The production capacity of chemical products is still growing and the growth rate is increasing
At the end of 2022, Zhuochuang Information selected 61 chemical products for capacity tracking analysis. In 2022, the capacity of the products showed an increase of 79%, and only 6% of the products showed a decrease in capacity, and the decrease was small. In addition to the growth trend, the growth rate also changed significantly from 2021, with 59% of the product capacity increasing.
From the perspective of capacity growth, most of the 61 chemical products selected this time have capacity growth distribution below 20%, accounting for 48%; Only 4 products, accounting for 7%, saw their production capacity shrink; Two products, lithium iron phosphate and dimethyl carbonate, saw their production capacity increase by more than 50%.
TOP10 chemical production capacity growth in 2022
China’s chemical market is huge. After decades of development, it not only has rich and complete categories, but also abundant production capacity. Some of its products have experienced the development from high import dependence to self-sufficiency, and some of its products have been exported to the world in large quantities. Zhuochuang Information selected 61 major chemical products to track the production capacity dimension, and concluded that in 2022, the production capacity of most chemical products is still in the process of expansion, and the growth rate is still fast.
It is not difficult to find that the top 10 drivers of chemical capacity growth in 2022 are the most common increase driven by co-production units or supporting upstream and downstream, such as PC, MMA, propylene glycol and styrene. PC is directly driven by the raw material bisphenol A, MMA is mostly extended by acrylonitrile-ABS units, propylene glycol directly benefits from the expansion of dimethyl carbonate capacity. Styrene upstream and downstream products are synchronized rapid production expansion. In addition, the products whose capacity expansion is driven by demand and profit also account for a relatively high proportion, while the chemical products whose capacity expansion is driven solely by profit decrease, and the products whose capacity expansion is driven solely by demand are also more.
High demand for new energy vehicles to drive high growth and high profits is still the main driving force
Among the chemical products selected this time, the chemicals in the upstream of the new-energy automobile industry chain far outperformed other ordinary chemicals in terms of capacity, price and gross profit. The more typical ones are lithium iron phosphate, dimethyl carbonate, lithium hydroxide, PC, etc. Thanks to the high growth of demand, the production capacity of related products has maintained a rapid growth in the past five years.
From January to November 2022, the production and sales of new energy vehicles completed 6.253 million and 6.067 million, respectively, doubling year-on-year growth. Lithium iron phosphate is one of the positive electrode materials in lithium batteries of new energy vehicles, and dimethyl carbonate is one of the components of electrolyte. Auto lights and other accessories are mostly used with PC. The production capacity of these series of related raw materials has maintained a fast growth rate in the past few years, as shown in the figure above. In addition to the volume growth on the demand side, the high profitability of some special materials has accelerated the active layout of production capacity. In particular, lithium battery related materials such as lithium iron phosphate, lithium carbonate and lithium hydroxide are the most typical. And the growth of other relatively bulk chemical products did not show breakthrough performance.
The biggest change in chemical production capacity in 2022
Behind the large-scale production capacity growth, the production capacity growth of some chemical products in 2022 also showed great changes compared with last year, and the overall growth rate was accelerated. Among the 61 chemical products selected this time, the production capacity growth rate of nearly 60% products was accelerated compared with that of 2021, and the rate of slowing growth was less than 40%.
Among the typical products showing a decline in capacity growth, acrylic emulsion happens to be in a gap in capacity expansion process, resulting in a slowdown in 2022, but will continue to expand in 2023 and the following years, driven by the expected growth of water-based coatings. During the year, some isopropyl alcohol devices were stopped or even dismantled for a long time, so the speed of production capacity elimination was accelerated, and the change was very obvious compared with 2021. Diethylene glycol is a byproduct of the ethylene glycol plant, and new production of both will slow in 2022.
Among the products accelerating capacity expansion, BDO is benefiting from high growth expectations in the downstream biodegradable sector, with a large number of new projects lined up for construction and production, and is in the midst of a rapid capacity expansion cycle. Epichlorohydrin was stimulated by the sharp increase in gross profit of the producers of tight supply last year, and the release of new projects accelerated. The production capacity of MMA and propylene glycol was accelerated by the active use of related equipment.
It is expected that in 2023, China’s chemical market will continue to maintain the overall steady expansion of capacity. In the next 3-5 years, some products will gradually appear the risk of oversupply, which may form A certain pressure on the price, and at the same time, the risk will lead to profit compression or even deterioration, such as bisphenol A, ABS, BDO, propylene oxide, etc. While the new entrants enrich the supply market, they reduce the industry concentration and increase competition, which is conducive to the profit tilt to the downstream and promote the balance of the industrial value chain. At the same time, some products will continue to be eliminated from backward production capacity, device scale and industry concentration will be optimized and enhanced, and the corresponding industry discourse power and competitiveness will also be improved.