rongsheng refinery 2019 free sample

Textile giants Rongsheng and Hengli have shaken up China"s cozy, state-dominated oil market this year with the addition of close to 1mn b/d of new crude distillation capacity and vast, integrated downstream complexes. Petrochemical products, rather than conventional road fuels, are the driving force for this new breed of private sector refiner. And more are on their way.

Tom: And today we are discussing the advent of petrochemical refineries in China, refineries that have been built to produce mainly petrochemical feedstocks. Just a bit of background here, these two big new private sector firms, Rongsheng and Hengli, have each opened massive, shiny new 400,000 b/d refineries in China this year. Hengli at Changxing in Northeast Dalian and Rongsheng at Zhoushan in Zhejiang Province on the East coast. For those unfamiliar with Chinese geography, Dalian is up by China"s land border with North Korea and Zhoushan is an island across the Hangzhou Bay from Shanghai. And the opening of these two massive new refineries by chemical companies is shaking up China"s downstream market. But China is a net exporter of the core refinery products, gasoline, diesel, and jet. So, building refineries doesn"t sound like a purely commercial decision. Is it political? What"s behind it? How will it affect the makeup of China"s petrochemical product imports?

Chuck: And clearly, the driver here for Rongsheng and Hengli, who as Tom mentioned, are chemical companies, they are the world"s largest producers of purified terephthalic acid, known as PTA, which is the main precursor to make polyester, polyester for clothing and PET bottles. And each of them were importing massive amounts of paraxylene, paraxylene being the main raw material to make PTA. And paraxylene comes from the refining of oil. And really the alternate value for paraxylene or its precursors would be to blend into gasoline to increase octane. So, when looking to take a step upstream in terms of reverse or vertical integration, they"ve quickly found themselves not just becoming paraxylene producers, but in fact becoming refiners of crude to begin with, which of course, is quite complex and it involves all kinds of co-products and byproducts. And as many know, the refining of oil, the primary driver there, as Tom has mentioned, is to produce motor fuels. So, we"re reversing this where the petrochemicals become the strategic product and we look to optimize or maybe even limit the amount of motor fuels produced.

Chuck: And margins, of course, as well because no one wants to shut down their unit just to accommodate the new Chinese production. And what remains to be seen is global operating rates for these PX units will be reduced to maybe unsustainable levels. And as margins come down, they"ll be down for everyone, but the most efficient suppliers or producers will be the ones that survive. And in the case of Hengli and Rongsheng, low feedstock costs, if you"re driving down the cost of paraxylene, you take the benefit on the polyester side because now you have very competitive or very low-priced feedstock.

Tom: That"s a really interesting point actually. Looking at it from a refining economics point of view, if you were trying to diversify your revenue stream, for example, you probably wouldn"t want to increase your gasoline production. And gasoline margins in Europe are barely breaking even, they"re about $4 a barrel. In China, gasoline crack spreads are actually negative. So, fine, they"re self-sufficient in the paraxylene they need for weaving, but are they just... the refiners themselves, Hengli and Changxing, are they now just soaking up losses from the sales of their transport fuels? I think they may be initially, but they"re not just giving their gasoline away, obviously, these refineries were conceived as viable commercial concerns. Hengli anticipates profits, I think, of around 12 billion Yuan per year from its Changxing refinery giving a payback period on that investment of around five years. And each company, interestingly enough, has a distinct marketing strategy for their transport fuel.

Rongsheng is trying to build itself into a retail brand around Shanghai and the Zhejiang area. And Hengli is trying to muscle into the wholesale market on a national level, so it"s gonna be selling products across China. And in that respect, as we were discussing earlier, in fact, Rongsheng appears to have an advantage because where it"s located on the East Coast of China, that region is net short still of transport fuels, but Hengli in the Northeast, that"s a very competitive refining environment. It"s a latecomer to an already pretty saturated market: PetroChina, a state-owned oil giant, is a huge refiner up in Northeast China with its own oil fields, so a ready-made source of low-cost crude. And it"s also very close to the independent sector refining hub in Shandong Province, which is the largest concentration of refineries in China. So, I think there are definite challenges for them on the road fuel front, even if it sounds like they"re going to be pretty competitively placed further downstream in the paraxylene market.

Tom: Well, that"s one of the peculiarities of the Chinese market. As private sector companies, neither Rongsheng nor Hengli are allowed currently to export transport fuels. That"s a legacy concern of the Chinese government to ensure energy self-sufficiency downstream to make sure there"s adequate supply on the domestic market of those fuels. So, that is a real impediment for them. And when they ramp up production of gasoline, diesel, and jet, they are driving down domestic prices and they are essentially forcing product into the seaborne market produced by other refineries. So, in that respect, the emergence of Hengli in Northeast China on PetroChina"s doorstep has created a huge new sense of competition for PetroChina in particular. And I think certainly when you look at their recent financial data, it"s quite clear that they are struggling to adapt to the new environment in which it"s essentially export or die, because these new, massive refineries are crushing margins inside China.

Chuck: And going back specifically to the Hengli and Rongsheng projects, it"s interesting to note, again, going to an order of magnitude or perspective, Hengli is producing or has capacity to produce 4.5 million tons of paraxylene. And in phase one, Rongsheng will have capacity to produce 4 million tons. And I know those are just large numbers, but again, bear in mind that last year, global demand was 43.5 million. So, effectively, these two plants, they could account for 20% of global demand. Just these two projects themselves to give you an idea of just how massive they are and how impactful they can be. Impactful or disruptive, it remains to be seen.

Tom: A sign it doesn"t do things by halves. Although that said, one of the interesting things they have done is essentially halved their transport fuel yields. So, where in a conventional refinery, your combined output of gasoline, diesel, and jet, those core products, might be in the region of 80%, when you look at these new refineries, they"ve really cut that back down to 40% or 50%. And there are new petrochemical refineries springing up, and it"ll be very interesting to see how disruptive those are to the petrochemical market. But in the conventional refining market, they are, I think under pressure to do even more to reduce their exposure to already weakened gasoline and diesel markets. I mean, Shenghong — this new textile company who"s starting up another massive new conventional refinery designed to produce petrochemical products in 2021, I think — they"ve managed to reduce that combined yield to around 30%. They"ve reduced that from an original blueprint.

Chuck: It"s remarkable, but just a note of caution, there have been other petrochemical and refinery projects built recently in Saudi Arabia and in Malaysia, in particular, with established engineering and established chemical and refining companies. And they"ve had trouble meeting the targeted dates for startup and it"s one thing to be mechanically complete, it"s another thing to be operationally complete. But both Hengli and Rongsheng have amazed me at how fast they were able to complete these projects. And by all reports so far, they are producing very, very effectively, but it does remain to be seen why these particular projects are able to run whereas the Aramco projects in Malaysia and in Rabigh in Saudi Arabia have had much greater problems.

Tom: It sounds like in terms of their paraxylene production, they are going to be among the most competitive in the world. They have these strategies to cope with oversupplied markets and refined fuels, but there is certainly an element of political support which has enabled them to get ahead of the pack, I guess. And suddenly in China, Prime Minister Li Keqiang visited the Hengli plant shortly after it came on stream in July, and Zhejiang, the local government there is a staunch backer of Rongsheng"s project. And Zhoushan is the site of a national government initiative creating oil trading and logistics hub. Beijing wants Zhoushan to overtake Singapore as a bunkering location and it"s one of the INE crude futures exchanges, registered storage location. So, both of these locations in China do enjoy a lot of political support, and there are benefits to that which I think do allow them to whittle down the lead times for these mega projects.

China"s private refiner Zhejiang Petroleum & Chemical is set to start trial runs at its second 200,000 b/d crude distillation unit at the 400,000 b/d phase 2 refinery by the end of March, a source with close knowledge about the matter told S&P Global Platts March 9.

ZPC cracked 23 million mt of crude in 2020, according the the source. Platts data showed that the utilization rate of its phase 1 refinery hit as high as 130% in a few months last year.

Started construction in the second half of 2019, units of the Yuan 82.9 billion ($12.74 billion) phase 2 refinery almost mirror those in phase 1, which has two CDUs of 200,000 b/d each. But phase 1 has one 1.4 million mt/year ethylene unit while phase 2 plans to double the capacity with two ethylene units.

With the entire phase 2 project online, ZPC expects to lift its combined petrochemicals product yield to 71% from 65% for the phase 1 refinery, according to the source.

Zhejiang Petroleum, a joint venture between ZPC"s parent company Rongsheng Petrochemical and Zhejiang Energy Group, planned to build 700 gas stations in Zhejiang province by end-2022 as domestic retail outlets of ZPC.

Established in 2015, ZPC is a JV between textile companies Rongsheng Petrochemical, which owns 51%, Tongkun Group, at 20%, as well as chemicals company Juhua Group, also 20%. The rest 9% stake was reported to have transferred to Saudi Aramco from the Zhejiang provincial government. But there has been no update since the agreement was signed in October 2018.

Zhejiang Petroleum & Chemical Co Ltd, one of two new major refineries built in China in 2019, said it has started up the remaining units in the first phase of its refinery and petrochemical complex.

The company, 51% owned by private chemical group Zhejiang Rongsheng Holdings, said it has started test production at ethylene, aromatics and other downstream facilities, without giving further details.

Zhejiang Petrochemical started a first 200,000 barrels per day (bpd) crude processing unit in late May, following on from the start of a 400,000-bpd refinery owned by another private chemical major Hengli Petrochemical.

Were the extra barrels needed to satisfy unusually strong refinery demand? A desire to stockpile supply for later consumption? Or perhaps add more cushion to strategic reserves?

SINGAPORE, Oct 14 (Reuters) - Rongsheng Petrochemical, the trading arm of Chinese private refiner Zhejiang Petrochemical, has bought at least 5 million barrels of crude for delivery in December and January next year in preparation for starting a new crude unit by year-end, five trade sources said on Wednesday.

Rongsheng bought at least 3.5 million barrels of Upper Zakum crude from the United Arab Emirates and 1.5 million barrels of al-Shaheen crude from Qatar via a tender that closed on Tuesday, the sources said.

Rongsheng’s purchase helped absorbed some of the unsold supplies from last month as the company did not purchase any spot crude in past two months, the sources said.

Zhejiang Petrochemical plans to start trial runs at one of two new crude distillation units (CDUs) in the second phase of its refinery-petrochemical complex in east China’s Zhoushan by the end of this year, a company official told Reuters. Each CDU has a capacity of 200,000 barrels per day (bpd).

Zhejiang Petrochemical started up the first phase of its complex which includes a 400,000-bpd refinery and a 1.2 million tonne-per-year ethylene plant at the end of 2019. (Reporting by Florence Tan and Chen Aizhu, editing by Louise Heavens and Christian Schmollinger)

China Merchants Energy Shipping (CMES), the energy transport unit of China Merchants Group, has signed a agreement with Rongsheng Petrochemical to form a strategic partnership.

Under the agreement, the two companies will jointly develop cooperation opportunities in the area of shipping, logistics, and financing, especially for the Rongsheng’s Zhoushan Green Petrochemical Base project, which started a trial operation recently.

Zhoushan Green Petrochemical Base project is a new integrated refinery and petrochemical project on Zhoushan Island, and it is set to become one of the world’s largest crude-to-chemicals complex.

According to data from C&EN’s Global Top 50 survey, the world’s largest chemical firms posted a 7.1% decline in chemical sales from 2019, to $795.8 billion in 2020, the fiscal year on which the survey is based.

It’s not a bad result, considering that economies around the world were shut down early last year to stem the global health crisis. The 50 firms that appeared in C&EN’s previous survey, which was mostly based on performance in prepandemic 2019, posted a 5.0% decline in chemical sales.

And although 2020 chemical earnings fell 22.6% for the 44 of the 50 firms that disclose chemical profits, they fell more—28.2%—in 2019 for the 46 companies disclosing profits on the list, when business in many major markets and economies was beginning to slow.

Now that it is breaking out chemical sales again, Shell rejoins the Global Top 50 this year after a 5-year hiatus. Rongsheng Petrochemical, which makes polyester chemicals, debuts this year. The former DowDuPont agricultural chemical business, Corteva Agriscience, made the cut as well.

For the second year in a row, BASF leads the Global Top 50 as the world’s largest chemical maker. And because it managed, despite the COVID-19 pandemic, to avoid a big decline in sales, the German chemical company widened its sales lead over the number 2, Sinopec, from about $5 billion in 2019 to nearly $21 billion in 2020. Though BASF is an industry leader, its greenhouse gas emission goal—released in 2019—had been relatively modest: keep its carbon dioxide output level as it grows throughout the 2020s. This year, BASF changed course and unveiled a more ambitious target: a drop of 25% compared with 2018 emissions by the end of the decade. Because BASF is building a major complex in China, the new goal means the firm will need to halve emissions from its current operations. BASF is working on technologies that will help it meet the ambitious target. It is testing renewable energy–powered electric heaters in steam crackers, as opposed to fossil-fueled furnaces, and it plans to use electrolysis to generate hydrogen. The German company trimmed its portfolio recently. In June, it completed the sale of its pigment business to Japan’s DIC for $1.4 billion. And BASF and Clayton, Dubilier & Rice are selling their Solenis water treatment chemical joint venture to the private equity firm Platinum Equity in a deal valued at $5.25 billion.

Saudi Arabia’s state oil company, Saudi Aramco, completed its purchase of a 70% stake in the petrochemical maker Sabic in June 2020. The purchase was meant to diversify Aramco, which today depends heavily on oil and gas. But soon after the deal closed, the firms announced they were reevaluating the scope of a planned complex that was to convert 400,000 barrels per day of crude oil into 9 million metric tons (t) per year of petrochemicals. Their new, more modest plan is to build an ethylene cracker and derivatives units that will be integrated with existing Aramco refineries. In another instance of Sabic and Aramco working together, the companies shipped 40 t of ammonia to a power plant in Japan last September. The ammonia is considered “blue” because carbon dioxide emitted during its manufacture was captured and used for enhanced oil recovery and methanol production in Saudi Arabia. In another strategic move, Sabic carved out a stand-alone business that includes its polyphenylene oxide, polyetherimide, and compounding units. The company got the businesses with its purchase of GE Plastics in 2007. Sabic had sought to combine them with Clariant’s masterbatch business, but those talks broke down in 2019.

As DuPont separated from DowDuPont in 2019, observers wondered how long the company would last. DuPont executive chairman Ed Breen once presided over the breakup of the industrial conglomerate Tyco, causing some to reckon he had similar plans for DuPont. It now appears that DuPont is here to stay, with Breen satisfied that the company has done enough portfolio restructuring to stand on its own. The largest of those moves came in February, when the company completed the sale of its Nutrition & Biosciences division to International Flavors & Fragrances. The sale yielded $7.3 billion in proceeds. DuPont also agreed to sell its biomaterials business, a producer of 1,3-propanediol, and it divested its stake in the polysilicon maker Hemlock Semiconductor. Breen elected to keep DuPont’s electronic materials business, which he had been considering selling. In fact, DuPont is adding to this business, agreeing in March to purchase Laird Performance Materials, which makes materials for heat management in electronics, for $2.3 billion.

Recently, Evonik Industries has been favoring small acquisitions that provide access to new technology. In June, it inked an agreement to buy Infinitec Activos for an undisclosed sum. Infinitec specializes in delivery methods—such as peptide-studded gold and sapphire nanoparticles, lipid vesicles, and nanoscale alginate hydrocolloid capsules—for cosmetic ingredients. In November, Evonik bought Houston-based Porocel Group, a provider of refinery catalysts and catalyst regeneration services, for $210 million. Evonik has built a burgeoning business in lipids for the delivery of messenger RNA (mRNA) used as a COVID-19 vaccine. And it recently launched a collaboration with Stanford University to develop a degradable polymer–based system for delivering mRNA therapeutics. In more traditional industrial chemistry, the company is building a $470 million plant in Marl, Germany, for making nylon 12, a high-end polymer critical for automotive applications such as brake lines. Evonik is considering the sale of its superabsorbent polymer unit, which employs 800 people.

Covestro spun off of Bayer in 2015 with just two main chemistries: polyurethanes and polycarbonates. The company finally made a major diversification move in April with its $1.8 billion purchase of DSM’s resin and functional materials business, which generated sales in 2019 of about $1.2 billion. In the transaction, Covestro is getting 3D-printing materials, antireflective coatings for photovoltaic panels, adhesives for recyclable carpets, acrylic resins for paints, and optical fiber coatings. In its core business, Covestro is spending $50 million to build a plant in Map Ta Phut, Thailand, by the end of next year that makes its Vulkollan polyurethane elastomers.

Hanwha Solutions has been growing prodigiously recently, mostly owing to its burgeoning solar materials business. The South Korean company is also branching out into other sustainable activities. For instance, it will begin supplying process water—heated to about 95 °C—to Lotte Chemical’s Ulsan, South Korea, plant, where the water will provide the energy for an absorptive refrigeration system. The companies say the setup will cut carbon dioxide emissions. In its core materials business, the company says it will double the production of for hydrogenated resins—used in adhesives—by the end of this year. The company entered that business only in 2019 to compete with the big players ExxonMobil and Eastman Chemical.

Recent years have seen Chinese petrochemical producers, often involved in the polyester supply chain, join the Global Top 50. Hengli Petrochemical is one of those firms. And now Rongsheng Petrochemical is another. The company is one of the largest producers of purified terephthalic acid in the world, with 13 million metric tons of capacity at plants in Dalian, Ningbo, and Hainan, China. It also makes polyester resin and fiber. It is an investor in Zhejiang Petrochemical, a large oil refinery and petrochemical complex that is currently starting up.

Nutrien got a new CEO in May when Mayo Schmidt replaced Chuck Magro. Schmidt had been chair of the Canadian fertilizer maker’s board since 2019 and before that was CEO of the Canadian agribusiness Viterra. Magro had led Nutrien and its predecessor Agrium since 2014. Because of tight supplies of potash, Nutrien pledged in June to raise production at its six potash mines. Like a few other big fertilizer makers, Nutrien is developing low-carbon ammonia as a fuel. It is one of 15 partners, led by the nonprofit RTI International, working with the US Department of Energy to develop a demonstration facility for low- and zero-carbon ammonia. Nutrien already produces about 1 million metric tons of low-carbon ammonia annually in the US and Canada.

DIC completed the acquisition of BASF’s pigment business in June for $1.4 billion. The deal was announced in 2019 but took considerable time to make it past antitrust authorities. Indeed, the US Federal Trade Commission forced DIC to sell its pigment plant in Bushy Park, South Carolina, at an $83 million loss. Separately, DIC’s Sun Chemical subsidiary launched a manganese-based curing agent for alkyd coatings and inks. It’s meant to replace toxic cobalt compounds.

The agrochemical and seed maker, formed through the merger of Dow and DuPont’s agrochemical units, joins the Global Top 50 for the first time. James C. Collins Jr. became Corteva Agriscience’s first CEO in 2019. Now Collins is retiring under fire after a 37-year career with DuPont and Corteva. An activist investor, Starboard Value, sought his removal along with eight Corteva directors for what it said was underperformance. Corteva agreed to put three of Starboard’s nominees on its board to make peace. Collins’s departure was announced a few months later.