Ethylene industry chain: polyethylene is one of the main downstream
Ethylene production process can be divided into three categories: coal to olefin (CTO/MTO), naphtha steam cracking, ethane cracking. (1) Coal to olefin refers to the methanol synthesized from coal as a raw material (CTO), with the help of similar catalytic cracking installed _ in the form of a fluidized bed reaction, the production of low-carbon olefin chemical technology. (2) Steam cracking of naphtha is a process of decomposing the molecules of various hydrocarbons in naphtha as raw material under high-temperature conditions, the main product of which is ethylene, with a small amount of propylene produced as a by-product. (3) Ethane cracking to make ethylene refers to the ethane obtained by direct distillation of crude oil through dehydrogenation, chain breaking, diolefin synthesis and other reactions to ultimately get ethylene process.
Ethylene production has been steadily increasing, and the downstream products are widely used. in 2020, China's ethylene production was 21.6 million tons, an increase of 5.25% year-on-year. Domestic ethylene downstream products include polyethylene (PE), ethylene glycol, ethylene oxide, styrene, polyvinyl chloride (PVC), etc. The main downstream products of these derivatives are synthetic materials such as plastics, fibers, rubber and other surfactants, adhesives, coatings, etc., which are ultimately used in packaging, agriculture, construction, electrical and electronic appliances, machinery and automotive industries. Among them, polyethylene (PE) is the largest downstream consumption of ethylene in China, and 61% of ethylene will be used to produce PE in 2020.
PE and ethylene glycol have a high import dependence. Ethylene monomer is not easy to store and transport, so it is usually processed into downstream products for transportation and sale. Among the major downstream products of ethylene, the import dependence of PE and ethylene glycol is higher, 48.0% and 54.7% respectively in 2020.
New materials downstream of ethylene
Film is currently the largest downstream consumption of PE in China.PE downstream applications include film, hollow containers, pipe profiles, injection molding, wire and cable, wire drawing, etc., of which the film consumption accounted for 53.50% (2020), and is mostly used in the production and manufacture of agricultural film and packaging film. In terms of new materials downstream of ethylene, we believe that photovoltaic EVA, POE (for photovoltaic cell encapsulation film), metallocene polyethylene (mPE), lithium diaphragm (wet process) is expected to usher in the development opportunities.
China's PE downstream high-end grade products import dependence is high. Domestic polyethylene downstream products to low-end general-purpose materials, market competition is fierce, while high-end grade products rely heavily on imports. Among them, octene *** polyethylene import dependence of the highest more than 90%.
2.1
EVA: rapid growth in demand for photovoltaic grade
EVA is ethylene vinyl acetate *** polymer, can be used in the production of photovoltaic adhesive film, foam, wire and cable, hot melt adhesive and other products. Different content of vinyl acetate (VA) can be made into different downstream products, when the VA content of EVA is higher than 28%, it can be used to make photovoltaic adhesive film; when the VA content of EVA is 5%-10%, it can be used to make foam.
_Supply side: stable growth in production, import dependence is gradually declining. 2017-2020, the domestic EVA production capacity to maintain at 972,000 tons; 2020 production of 741,000 tons, 2016-2020 average annual compound growth rate of 15%. China's EVA import dependence is high, EVA imports in 2020 1.177 million tons, import dependence of 63%, down from 72% in 2016.
Photovoltaic-grade EVA import dependence is high. 2021, Yu Nengchem, Yangzi Petrochemical, Sinochem Quanzhou production capacity gradually put into operation, as of August 2021, the domestic EVA production capacity of 1,472,000 tons, the top four companies (Sierpont, extend the China Coal Yulong, Yanshan Petrochemical, Yangzi BASF) production capacity accounted for a combined total of 72.0%. Among them, photovoltaic-grade EVA has higher requirements for vinyl acetate content, and only three domestic companies, Silbon, Levima, Ningbo Formosa Plastics, are able to produce it. According to the prospectus of Levoxin, in 2019, China's photovoltaic-grade EVA production is only 134,000 tons, consumption of 531,900 tons, import dependence of 75%.
The new PV-grade EVA to achieve stable production cycle is long, supply tension is expected to support high boom. According to our statistics, currently under construction and planning for the new EVA capacity of more than 2 million tons, EVA into a new round of capacity expansion. However, according to the Union泓新科 "2021年4月8日Investor Relationship Activity Record Sheet"，New EVA mounted_production of photovoltaic adhesive film material usually requires a longer mounting_debugging and exploration of the break-in period, and in the mounting_total production capacity accounted for a limited percentage of the total capacity, so we expect that the future, although there is a new EVA mounted_put into operation plan, but photovoltaic-grade EVA to achieve a longer cycle of stable production, the supply is tight and is expected to support a high boom in the next 1-2 years.
_Photovoltaic grade EVA
_Demand side: photovoltaic film is the largest downstream consumption of EVA. 2020, the domestic EVA consumption of 1.864 million tons, of which the demand for photovoltaic film accounted for 33.5%; followed by foam is also an important downstream consumption of EVA, 2020 accounted for 30%, is used in medium and high-grade travel shoes, hiking shoes, slippers, sandals, soles and upholstery materials. In addition, EVA can also be used in wire and cable and other fields.
According to the CPIA forecast cited in the Haiyou New Material 2020 Annual Report, the global new PV installed capacity in the next 5 years will maintain an average annual compound growth rate of 15%-20%, and the global new PV installed capacity in 2025 is expected to reach 270-330GW. we press this calculation, the annual average growth in demand for PV-grade EVA is about 200,000 tons in 2021-2025, and the global PV-grade EVA demand will increase by 2025, and the global PV-grade EVA will increase by 2025, and the global PV-grade EVA demand will increase by 20%. In 2025, the global demand for PV-grade EVA will be 1.62-1.98 million tons.
Price spread: since the second half of 2020, EVA prices have risen sharply. 2013-2019, EVA prices were basically stable at 10,000-15,000 yuan / ton, the spread of 3,000-8,200 yuan / ton. from the second half of 2020, driven by demand for PV installations, the EVA price rose 124%. As of August 26, 2021, EVA price 21,500 yuan / ton, spread 14,287 yuan / ton.
2.2
POE: double-glass components to bring incremental demand, looking forward to domestic technological breakthroughs
Polyolefin elastomers (POE) is a polymerization of ethylene and high-carbon alpha olefins (1-butene, 1-hexene, 1-octene, etc.) from the random **** polymer elastomer. Due to the special molecular structure, POE has good rheological properties, mechanical properties, and UV resistance.
_Supply: POE products are completely dependent on imports, and the industry is highly concentrated. Foreign petrochemical companies with POE production technology have patented the catalysts required for production, and have tightly blocked the production of high-carbon α-olefin production process technology as an important raw material for POE, restricting its transfer. The production technology is now in the hands of only six large foreign companies (Dow, ExxonMobil, Mitsui Chemicals of Japan, LG Chem of South Korea, SK Group, and Saudi Arabia's Shabiq), with a high degree of concentration in the industry; Dow is the world's largest producer of POE, with a share of 42%.
Domestic enterprises to speed up the POE and raw materials octene R & D. POE as a purely dependent on imports of products, its current production profits, import prices are higher. Domestic Yantai Wanhua, Wison Engineering, Jingbo Petrochemical, Maoming Petrochemical, Tianjin Petrochemical and other enterprises are accelerating the layout of POE R & D, the overall is still in the pilot stage, industrialization needs to be further breakthroughs. In addition, in the POE raw materials, octene is also currently all dependent on imports, the domestic future in the construction of Daqing Petrochemical 0.5 million tons loaded _, Wanhua Chemical 70,000 tons loaded _, Maoming Petrochemical and other loaded _ will make up for the industry chain gap.
_Demand: the largest domestic consumption of POE for the automotive industry. According to Lonza information, the domestic POE consumption in 2019 is 450,000 tons, of which 68% is used in the automotive industry. Lonzong Information expects the average annual consumption growth rate of domestic POE to be more than 10% in the future.
Double-glass component market share increased to drive POE film demand growth. The current encapsulation film mainly includes EVA film and POE film, EVA has a low melting point, good fluidity, high transparency, lamination process is mature and other advantages, but its strength is low, the water vapor transmission rate and water absorption rate is large, weather resistance is poor, POE film is the biggest advantage is the low water vapor transmission rate and high volume resistivity, to ensure that the components in the high temperature and high humidity environment, the operation of the safety of the security and aging resistance, so that the components can be used for a long time. This ensures that the modules can be used for a long time. For double-glass modules with double-sided cells, the use of multilayer **** extruded POE film has strong competitiveness in terms of module production efficiency and comprehensive module performance.
In 2020, the module encapsulation material is still mainly EVA film, especially transparent EVA film, but its share has declined, transparent EVA film market share of 56.7% in 2020, down 12.9 percentage points; POE film and *** extrusion POE film accounted for an increase in the share of 25.5% in 2020, an increase of 13.5 percentage points. percentage points. We believe that the growth in the market share of POE adhesive film is caused by the increase in the market share of double-glass modules and the price increase of EVA particles. We expect that with the large-scale application of double-glass modules and double-sided batteries, high-quality adhesive films, including multi-layer **** extruded POE films, are expected to further increase the market scale.
POE price increase in 2021. 2020-2021 POE prices show stepwise growth, especially since 2021, with the gradual recovery of demand in the automotive industry, POE prices rose sharply, as of August 27, 2021, POE price of 23,000 yuan / ton, up 31% from the beginning of the year.
2.3
Lithium diaphragm: wet process market space
_Industry chain: lithium battery composition structure and industry chain. Lithium-ion battery diaphragm, positive electrode materials, negative electrode materials and electrolyte is composed of the most important materials of lithium-ion batteries. Lithium-ion battery internal spiral winding structure, need to use very fine and permeability of the film isolation material in the positive and negative electrode spacing and become. According to the prospectus and a list of Xingyuan material consulting information, the cost of the diaphragm accounts for about 11% of the cost of lithium-ion batteries, the gross profit margin of up to 50% -60%, is the four main materials in the gross profit margin of the highest products.
The upper reaches of the lithium battery industry chain include cobalt, manganese and nickel ores, lithium ores, graphite ores, polypropylene and polyethylene. In the lithium battery manufacturing industry chain, the core part of the battery pack manufacturing is the battery cell, the battery cell packaging and then integrated wire harness and PVC film constitutes the battery module, and then join the wire harness connector, BMS circuit board constitutes the finished power battery.
Lithium batteries have a wide range of downstream applications, including energy storage, transportation, consumer electronics and industrial equipment industry. According to GGI Research Institute of lithium, new energy vehicle lithium battery demand continues to increase, in 2020 China's automotive power battery shipments of 80GWh, an increase of 12.7% year-on-year, accounting for 56% of China's lithium battery market, far more than the other application terminals; and 3C digital market growth tends to flatten out, it is expected that with the promotion of 5G technology, the demand for smartphone terminals, civilian drones, smart wearable devices and other products. The rise of wearable devices and other products will drive the growth of consumer batteries.
_Lithium diaphragm performance and role. Lithium-ion battery diaphragm has good mechanical properties, chemical stability and high temperature self-closing properties, can be isolated from the battery positive and negative electrodes, allowing lithium ions to pass through, to prevent high temperature caused by the battery explosion, etc. to improve the comprehensive performance of lithium-ion batteries, and make lithium-ion batteries than the traditional lead-acid, nickel-cadmium batteries in terms of energy density, cycle life, environmental protection and safety, etc. have obvious advantages.
Lithium-ion battery diaphragm has a large number of zigzag through the microporous, can ensure that the electrolyte ions through the formation of free charging and discharging circuit; and in the battery overcharging or temperature rise, the diaphragm through the closed-cell function of the battery's positive electrode and negative electrode to prevent direct contact and short circuit, to achieve the blocking of the current conduction, to prevent the battery from overheating or even the explosion of the role of the role of the battery.
_Lithium diaphragm main production process. Lithium-ion battery diaphragm needs to have a number of characteristics of its production process puts forward special requirements, and the production process, including raw material formulations and rapid formula adjustment, microporous preparation technology, complete sets of equipment designed independently and other processes. Among them, the microporous preparation technology is the core of the lithium-ion battery diaphragm preparation process, specifically divided into the wet two-way stretching process and dry process. Among them, the wet diaphragm for polyethylene monolayer film, dry process is the main raw material of polypropylene monolayer film.
From the two production processes of their respective downstream segmentation of downstream areas, polypropylene as the main raw material for the dry process for lithium iron phosphate power batteries (hereinafter referred to as LFP batteries); and wet process is mainly flow to the ternary material class of power batteries and 3C consumer electronics field.
_Supply: the domestic lithium diaphragm market space. According to the foresight industry research institute cited gaogong lithium data, 2020 China lithium diaphragm shipments of 3.72 billion square meters, an increase of 35.8%, we believe that mainly due to the 2020H2 domestic new crown outbreak is under control, small power, 3C digital and storage lithium battery field of shipments are greatly enhanced, and domestic enterprises have a low-cost, high-performance competitive advantage.
Wet diaphragm shipments grew steadily, maintaining a stable proportion. According to GaoGong production research lithium research institute data, from the diaphragm product structure, 2020 wet diaphragm shipments of 2.6 billion square meters, an increase of 30% year-on-year, accounting for 70% of the total diaphragm shipments. 2020 wet diaphragm accounted for 70.40%, and the proportion of 2019 is relatively close.
The advantages of wet diaphragm compared to dry hair process are thin thickness, high strength, and uniform hole making, so wet diaphragm can better meet the requirements of lithium-ion battery diaphragm. However, the disadvantage of wet diaphragm is the higher cost, mainly used in high-end digital and ternary power lithium battery products.
Lithium diaphragm production capacity expansion, high-end capacity shortage. According to the new chemical materials public cited ICC Xin fern information, domestic lithium diaphragm production capacity since 2015 began to expand rapidly, as of the end of 2020, the domestic wet diaphragm production capacity reached 7 billion square meters / year, dry diaphragm production capacity close to 3 billion square meters / year. Enterprise capacity scale effect to enhance the cost of diaphragm further decline, resulting in lower diaphragm prices, market scale decline. Production capacity of large-scale expansion at the same time, the domestic diaphragm high-end production capacity is insufficient, low-end excess capacity of the contradiction is more and more prominent. At present, the domestic high-end wet process is important to rely on imports.
Insufficient R & D capability of matrix raw materials, plagued by product independence. Insufficient R & D capability of matrix raw materials is the main problem in China's wet diaphragm production at present, the matrix material is mainly high molecular weight polyethylene. According to the Xinxin Industry Research Center, in 2019, China's HDPE demand is about 14.59 million tons, but domestic production is only about 7 million tons, of which the import dependence is about 48%.
Domestic market share distribution, in 2020, among the wet process preparation manufacturers, Shanghai Enjie accounted for 44.90%, and the other major producers are Xingyuan Material (19.6%) and Sinoma Technology (18%); in the dry process, Xingyuan Material is the industry leader, accounting for 23.5% of the total market share, the company disclosed in August 2019 The company disclosed in August 2019 the "super coating factory" project plan, the total construction period is 36 months, divided into two phases of construction, of which the first phase of the project is proposed to build 8 dry diaphragm production lines and 30 coating diaphragm production lines, after reaching production, the formation of lithium-ion battery dry diaphragm annual production capacity of 400 million square meters. According to the company's 2020 annual report, "super coating plant" project construction is advancing smoothly, and has been supplied to customers.
In addition, according to Hengli Petrochemical 2021 half-yearly report, the company tapped into the trend of new energy demand for new chemical materials, by virtue of the strategic support of the chemical platform and the downstream high-end film market for many years of accumulation, rapid layout of lithium diaphragm field. At present, the company has substantively launched the lithium diaphragm new product capacity construction of the preparatory work, including diaphragm equipment procurement negotiations and core talent market recruitment and other work, fast and efficient to promote the progress of the business.
_Demand: New energy vehicle sales rise to boost demand for power batteries. Behind the large-scale expansion of production capacity of diaphragm enterprises, is a new round of power battery field capacity expansion race and new energy vehicle sales growth, strong demand for lithium battery diaphragm, thus attracting the diaphragm enterprises to actively expand production to follow up. 2021 June, new energy vehicle production reached 273,000 units, an increase of 135.3% year-on-year, the cumulative value of the production of 2021H1 amounted to 1,284,000 units, an increase of 205%, further boosting the power battery demand. 205%, further pulling the power battery production growth, 202 June year-on-year growth of 184.3%.
Domestic lithium diaphragm future demand. According to GGI research institute of lithium data, in 2020, the domestic lithium battery shipments of 143GWh, a year-on-year growth of 22%, is expected to reach 232GWh in 2021, reached 615GWh in 2025, the compound growth rate of 27.6% during the 2021-2025. Calculated at a compound growth rate of 27.6%, shipments are expected to reach 232, 296, 378, 482, 615GWh in 2021-2025.
According to the reply of Enjie on the investor interaction platform quoted by the Flush Financial Research Center, the demand for diaphragm corresponds to about 15 million square meters of 1GWh of lithium batteries, which is estimated to be the demand for domestic lithium diaphragm during 2021-2025.
Wet diaphragm future market space. According to the 2020 wet diaphragm process share and its growth rate measurement, we expect that in 2021 the wet diaphragm process share will remain stable, and the demand for wet diaphragm in 2021 is about 2.44 billion square meters. In the future, with the expansion of the lithium diaphragm market, wet diaphragm demand will also be further expanded.
2.4
Metallocene polyethylene (mPE): demand for new packaging film to drive the growth of demand
Metallocene polyethylene (mPE) is the use of metallocene as a catalyst to produce polyethylene. Because of its rigidity and transparency, high heat sealing strength, excellent stress crack resistance, weight reduction and other advantages, mPE is currently the highest production, the fastest progress in the application of the most active research and development of metallocene polymers.
_Supply: the domestic supply of mPE is mainly dependent on imports. in 2019, the global production of mPE is more than 24 million tons. in 2019, China's mPE production is about 20.0 million tons, the consumption of about 922,000 tons, the self-sufficiency rate is only 21.7%. in 2020, China's mPE imports are about 780,000 tons. At present, there are 6 main manufacturers of mPE in China, which are Qilu Branch, Maoming Branch and Yangzi Petrochemical Company Limited of SINOPEC; Daqing Petrochemical Company and Dushanzi Petrochemical Company of PetroChina; and ChemChina Shenyang Chemical Company Limited. Except for the three enterprises of Sinopec, all other enterprises use imported metallocene catalysts.
A total of 1.6 million tons of mPE is planned to be put into production in China in the future. With China's R&D efforts in metallocene catalysts and their mPE, the products have made great progress. We expect that domestic mPE import dependence is also expected to be reduced in the future.
_Demand: global future mPE demand growth faster. 2020, the global mPE demand reached 25 million tons. Europe and the United States is the largest market for mPE demand. Among them, in the past five years, the average annual demand growth rate of metallocene low density polyethylene (mLLDPE) in the U.S. is about 17%, and the demand in 2020 is about 2.5 million tons, and it is expected that the demand in 2021 will reach 3 million tons. During the same period, the consumption of mPE in Asia is growing rapidly, especially China, Japan, South Korea and Singapore are becoming important consumer markets with huge demand potential.
Domestic downstream product structure upgrade drive mPE demand growth. According to "metallocene polyethylene market status and technological progress_Song Qianqian", it is expected that China's mPE demand will continue to grow at a rate of more than 10%, the demand in 2020 has reached 1 million tons, is expected in 2021 will reach about 1.1 million tons. Among them, from the perspective of mPE downstream field, the application of packaging field accounts for the highest proportion, accounting for about 70%, PE-RT pipe accounts for about 25%. At present, major foreign companies are actively researching metallocene polyethylene repackaging film, through the use of new repackaging film, you can keep the film performance unchanged while reducing the film thickness. Metallocene polyethylene after bi-directional stretching can also be made of breathable film, widely used in protective clothing and construction of moisture permeable waterproof materials.
_Price: mPE prices have been on an overall upward trend since June 2020. mPE prices reached their peak in March 2021 and then began to decline continuously, with a slight price recovery in July. the overall price trend from 2020-2021 is an upward state.
Risk Tips
Less-than-expected demand for ethylene and its downstream products; rapid launch of new production capacity; and large fluctuations in product prices.