China Market Insider Why is There a PDH Plant Construction Boom in China?

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Asia Waypoint

Since the end of the corona lockdowns in China in spring 2020, the propane dehydrogenation (PDH) industry there has been expanding like never before. More than 30 new propane dehydrogenation plants with a capacity of more than 30 million tons per year are currently under construction in China or are planned for the coming years.

Beijing/China – Contributing to the increasing popularity of dehydrogenation technologies compared to other propylene generation methods such as naptha cracking or catalytic cracking is primarily its cost-effectiveness. With lower initial investment, high propylene yield can be generated at high temperatures but comparatively low pressure.

Demand for propylene continues to grow in China, and China's political leadership is also looking to gradually replace imports with domestic production. The massive surge in investment in China's PDH sector is, therefore, due to both market and political factors.

In the past two months, groundbreaking ceremonies have been held for a whole series of PDH plants in China, for example, on April 17 for a new PDH plant with a capacity of 600,000 tons per year by Jiangsu Ruiheng New Materials in Lianyungang. This is reported by the Chinese industrial newspaper Zhongguo Gongye Bao, which also reports progress on another 600,000-ton plant by Formosa Plastics Ningbo.

Among the major projects under construction is the China Zhenhua Propane Dehydrogenation and Propylene Oxide Project. With an annual capacity of one million tons, this is expected to be the largest PDH project in the world when completed, the Chinese industry newspaper writes.

4.42 Million Tons per Year of New Capacity

Traditional oil companies are also increasingly entering the lucrative PDH business. One example is Shaanxi Yanchang Petroleum Group, which is investing about 2 billion dollars (13 billion yuan) into a new 600,000-ton-per-year plant on the southern island of Hainan.

By the end of this year alone, if things go according to plan everywhere, a total of 4.42 million tons per year of new capacity at new PHD units and steam crackers is expected to come online in China, which will "hugely" drive up demand for propane gas in China, ICIS experts write.

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Most propane gas used in Chinese PDH plants must be imported from abroad for quality reasons. All the new PDH plants in the People's Republic are now generating an additional import demand of 3.42 million tons of propane gas by the end of 2022, ICIS estimates.

The corona crisis and the construction boom of PDH plants in China are two factors raising question marks among chemical industry market watchers in Europe this year. In Europe, several crackers continue to operate at reduced utilization rates due to reduced demand in the first half of this year because of the Corona crisis, negatively impacting propylene supply, according to an analysis by S&P Global.

Replace Foreign Producers with Domestic Ones

In China, on the other hand, production capacity is currently growing even faster than demand. Traders are still uncertain how this will affect China's propylene imports in the short to medium term. But short-term market fluctuations have never deterred China's chemical industry from investing. It is working enthusiastically to replace foreign producers with domestic ones – spending on technical efforts. One example is Hebei Haiwei's new PDH plant. Because the core component of a PDH plant can weigh between one thousand and several thousand tons, China Construction Equipment & Engineering made the piece locally, PROCESS (China) reports.

* Henrik Bork, former China correspondent of the German Süddeutsche Zeitung and the Frankfurter Rundschau, is Managing Director at Asia Waypoint, a Beijing-based consulting agency. ‘China Market Insider’ is a joint project of the Vogel Communications Group, Würzburg, and Jigong Vogel Media Advertising in Beijing.

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