Major capacity additions in the Chinese paraxylene market in the next four years, estimated to be at least 20 mta over 2017-2021, are forcing a rethink of new projects elsewhere in Northeast Asia. The most notable non-Chinese project in Northeast Asia is the proposal to expand South Korean refiner GS Caltex's PX production capacity at Yeosu to 2.35 mta, from 1.35 mta, via a joint venture comprising GS Caltex as well as Japan's Showa Shell and Taiyo Oil. Showa Shell, Taiyo Oil and GS Caltex signed a memorandum of understanding in April 2012, with the aim to complete the expansion by end-2014, but the project never moved beyond the proposal stage.
With a lot of Chinese PTA producers integrating upstream over the next few years, demand for imported PX is definitely going to take a massive hit. Rongsheng Group and Tongkun Group are among the Chinese companies that are building an integrated refinery and petrochemical complex on Zhoushan Island in Zhejiang province, which will alone boost the country's PX production capacity by 8 mta by 2020. Stage one comprises the completion of 4 mta of PX production capacity by end-2018, and stage two an additional 4 mta by end- 2020. Additionally, stage two of Ningbo Zhongjin Petrochemical's PX project is expected to start up in late 2018, which will add another 2 mta of PX capacity to its existing 1.6 mta. Ningbo Zhongjin is a subsidiary of Rongsheng Group. Rongsheng Group is also one of the owners of China's largest PTA producer, the Yisheng group of companies, which has PTA plants at Ningbo, Dalian and Hainan, totaling more than 12 mta of PTA capacity. Tongkun is also a PTA producer with one plant at Zhapu, Zhejiang province, with a capacity of 1.5 mta. The company is building another 2.2 mta PTA plant at Zhapu, which is expected to start up in 4Q17. Of the 12.36 million ton of PX that China imported in 2016, 47.37% or 5.86 million ton was sourced from South Korea, Chinese customs data showed, while China's total imports from Northeast Asia, including South Korea, accounted for 77.67% last year.
For China, as the world's largest producer of PTA with a total nameplate capacity of close to 45 mta, and hence the largest consumer of PX, a move to increase its own domestic PX supply is logical, although it has faced challenges in recent years. In 2015, Dragon Aromatics at Zhangzhou suffered its second explosion in as many years at its 1.6 mta PX plant, which prompted an investigation by authorities into its operations and procedures. The plant remains shut till this day.