An industry heavyweight: the significance and scale of Chinese paraxylene capacities

Chinese paraxylene (PX) production holds a notable cost advantage over PX production in other Asian nations as a sizable portion of PX capacities for select countries (in KT) per operating complex are in excess of 2mn t/yr.

For context, in 2024, China's total annual PX capacity reached a figure close to 47mn t. Out of this, 18.4mn t was distributed across seven megacomplexes, each with a capacity exceeding 2mn t. Specifically, as per Argus datasets, 39pc of China's PX plant capacity is concentrated in units with capacities of 2mn t/yr or more, and just 36pc in units with capacities between 1-2mn t/yr.

On the other end of spectrum, Japanese units mainly consist of capacities at or below 500,000 t/yr. Meanwhile, South Korea and Thailand have PX plants with capacities ranging between 1-2mn t/yr, but none exceed this level. This capacity limitation and the older average age of these production units means that China has an enormous competitive edge in terms of scale and best-in-class technology. Large-scale production facilities can spread fixed costs, such as capital investments in plant and equipment, over a larger volume of output. This leads to lower average costs and enhances the profitability of the operation. Further, the capital cost for building a PX plant in China is estimated to be approximately 20pc lower than in the rest of Asia. Additionally, China has demonstrated capability to construct a PX facility in around 30 months, compared to 48 months elsewhere in the world. Large-scale aromatics producers present in China often integrate their operations with upstream and downstream processes, creating synergies that further enhance efficiency. Back integration of purified terephthalic acid (PTA) to PX is a strategic move that offers numerous benefits such as lower production costs, stable supply chain, and improved profit margins to the petrochemical industry, particularly in countries like China where the polyester value chain is a significant part of the economy. Polyester is utilized in different applications such as garments, home textiles, industrial yarns, packaging, and bottles.

Hengli serves as a prime example of successful backward integration. Initially established in the weaving sector, the company has expanded its operations to include refining, thereby gaining greater control over feedstock and enhancing profit margins. This strategic move into refining has opened up new business opportunities for Hengli, such as operating an ethylene cracker and derivatives complex, and developing aromatic derivatives beyond polyester production.

Integration aids these companies in other unexpected ways as well. The development of affordable aromatics by these companies helps them expand into related derivatives. This strategic approach allows them to diversify their portfolio and tap into new market opportunities. This is evident by the increase in phenol capacity from 3mn t in 2019 to 6.6mn t in 2024, and the rise in styrene capacity from 9mn t in 2019 to 22.6mn t in 2024 in China.

The production of competitively priced benzene (BZ) and PX in these megacomplexes has allowed Chinese firms to diversify into various downstream chemicals. For instance, ZPC, an affiliate of Rongsheng Petrochemical, which owns a refinery complex, also produces styrene and phenol from its complex.

The rapid establishment of numerous world-class complexes in China over a short period has led to an oversupply of various products. This surge in production capacity has significantly impacted the market dynamics, resulting in an excess supply of key chemicals and derivatives. For instance, the expansion of PX and PTA capacities has flooded the market, creating a supply glut. This is evident by the downward pressure on PX-naphtha price spreads which hovered around $462/t in 2018 and $383/t in 2019 compared to $283/t in 2024.

Looking ahead, we anticipate that these megacomplex facilities will continue to exert downward pressure on the operating rates of other exporting countries. For example, South Korea's operating rates, which were in the high-80sin 2020, have decreased to the low-80sin 2024. According to Argus analytics, the operating rates are expected to hover around that range for the next few years. Additionally, though the pace of PX expansion is decelerating, the addition of large capacities, such as the 3.2mn t/yr PX capacity at the Gulei refinery, will lead to lower operating rates and possible rationalization of some older, less efficient units in the region.

Rationalization in selected countries between 2019 & 2025 (in mn t): 

Author: Santosh Navada