China's BPA industry restructures on further supply increases

In the first half of 2024, following China's further BPA capacity expansion, BPA supply and demand were growing in tandem, but capacity utilization dropped. In terms of global trade, BPA imports kept shrinking against a rise in exports. BPA prices, along with some minor fluctuations, declined either on a monthly or yearly basis. This new supply landscape and changes in trade flows have triggered divergences in market trends. Anyway, for China's BPA market in 2024, things will change a lot, and a new business format will take shape.

1. Supply is on the rise, Shandong takes the lead in terms of capacity after a regional capacity share restructuring, and supply flows become more dispersed.

In H1 2024, there were two new producers coming on stream, with a total capacity of 600,000 t/y, namely Qingdao Haiwan and Hengli Petrochemical, with an annual capacity of 240,000 t/y and 360,000 t/y, respectively. This grew China's total BPA capacity to 5.48 million t/y, a year-on-year increase of 12.31%.

China BPA Capacity Regional Distribution in H1 2024

Source: OilChem

The newly commissioned units this year are located in Shandong Province in East China and Liaoning Province in Northeast China. Consequently, East China ranked first in capacity, with a regional BPA capacity of 3.72 million t/y, accounting for 70% of China's total BPA capacity, followed by Northeast China (11%) and Northeast China (9%). Shandong Province passed Jiangsu and became the largest BPA producer and supplier in the country, following the operation of Qingdao Haiwan's BPA unit.

Ranking of BPA Capacity by Province in H1 2024

Source: OilChem

Over the past two years, the operation of new BPA capacity has led to a rise in the amount of BPA as a pure commodity in circulation. In terms of BPA supply, Northeast China has outnumbered North China and Shandong, becoming the second most important region supplying BPA, second only to East China. The output flow from Northeast China is much greater than that from North China (The output of Sinopec SABIC Tianjin's 240,000 t/y unit is all for self-use. Sinopec Beijing Yanshan has been shut down since November last year, with no clear plan to restart. Cangzhou Dahua's 200,000 t/y unit has to supply goods to a 100,000 t/y PC unit), and also greater than that from Shandong (Lihuayi Weiyuan, Wanhua Chemical, and Luxi Chemical all have downstream PC units, and Luxi Chemical's 200,000 t/y unit has been shut down since March 18).

In addition to local consumption, current BPA supply mainly flows from Northeast China and Shandong to regions such as East China, North China, South China, and Central China.

2. Due to increased domestic supply and long-term losses, some suppliers tighten or temporarily cease production.

In H1 2024, China's domestic BPA supply exceeded 2 million tonnes, a nearly 19% increase year-on-year, but demand growth fell below expectations, fueling intense price competition in the industry. In March, low-end BPA prices fell below Yuan 9,000/t, and meanwhile, firm benzene prices weighed on BPA production costs, making losses become a norm in the industry, with an average loss of Yuan -842/t from January to May.

Hainan Huasheng has revised down its operating load and limited production since the fourth quarter of last year. Zhejiang Petroleum & Chemical stopped selling BPA to external buyers and has allocated all resources to its downstream BPA-PC integrated project since April. Pingmei Shenma postponed the restart of its unit, which was overhauled in early April, and it is purchasing PBA from other suppliers to maintain normal operation of its PC unit. Several other producers, including Chang Chun Petrochemical, Nan Ya Plastics, and Jiangsu Ruiheng have also adjusted their operating loads to balance production and sales.

China's BPA Production and Consumption from 2020 to 2024

Source: OilChem

3. BPA wholesale prices slightly fluctuate downward, with evident regional divergences.

From January to May, in general, China's spot BPA market trended downward, along with fluctuations triggered by changes in supply and demand, as well as costs.

In the first quarter of this year, China's BPA wholesale prices fell after an early rise and averaged Yuan 9,533/t, down 4.60% from Q4 2023 and down 2.60% from Q1 2023. In Q1 2024, prevailing BPA wholesale prices were cited at Yuan 9,150-9,950/t in East China, and the difference between low-end and high-end prices was Yuan 800/t (compared to Yuan 1,025/t in Q1 2023). The price drop can be attributed to the following internal factors in the country:

(1) China's domestic supply of BPA increased, but demand growth was not keeping up, leading to oversupply.

(2) Since Q3 2023, there has been a significant increase in new BPA capacity, resulting in price wars in the industry, especially for newly produced resources, which were priced relatively low.

(3) Economic recovery in Q1 was slower than expected, coupled with supply-demand conflicts, shaping an overall weak market sentiment.

China's BPA and Feedstock Markets in 2024

Source: OilChem

In the second quarter of this year, China's BPA wholesale prices fluctuated upward. From late March to May, due to maintenance, unexpected load reductions, and some crystallization maintenance, the industry's overall capacity utilization rate fell, and BPA production ranged from 315,000 to 344,000 tonnes, a result of suppliers' self-balancing efforts. On the raw material side, benzene prices climbed steadily, while phenol and acetone prices were higher on the whole, providing consistent cost support for BPA. In mid-to-late April and mid-to-late May, this resonated with BPA supply, both acting as the main drivers for BPA price gains.

From January to May 2024, China's BPA wholesale prices ranged from Yuan 9,150/t to Yuan 10,000/t, with a volatility rate of 8.88%, and the market presented a trend of gradual decrease year by year since 2020. It is expected that, under the backdrop of supply exceeding demand for BPA, this trend will continue.

China BPA Price Volatility from H1 2020 to H1 2024 (Unit: Yuan/t)

Source: OilChem

China BPA Regional Price Trends from 2023 to 2024

Source: OilChem

During this period, when the BPA supply side evolved and industry competition intensified, regional price differentiation became evident, and the price difference between East China and regions like Shandong, North China, Huangshan, and South China continued to widen. Increased BPA supply from the new capacity in Shandong and North China had a significant impact, inevitably dragging down BPA prices in these regions. South China saw the volume of BPA sourced from overseas suppliers or other regions of China shrink as it was transforming into more of a region supplying BPA. Huangshan, which mainly supplies solid epoxy resin, became an important place for new production units to consider. The volume of high-priced resources from established brands gradually decreased, and the difference between low-end and high-end prices was narrowing progressively.

Written by Todd Zhu, todd@oilchem.net

Edited by Navy Liu, liuchuanjun@mysteel.com