In 2014, the CR5 concentration of China’s maleic anhydride production enterprises, which represents the level of industry concentration, was 31.87%, and in 2023, ten years later, this figure is expected to reach 70%, and the expansion of the industry’s leading enterprises and the delisting of small and medium-sized production enterprises have become the main driving force behind this. In the long run, the future maleic anhydride industry is planned to build a large capacity, will continue to impact the industry’s original supply pattern, in this process, there is still room for further increase in industry concentration.
200,000 tons of new production capacity into the market TOP5 enterprises ushered in the reshuffle
Recently, China’s maleic anhydride market once again ushered in heavyweight projects into production. Since the end of July, the new production capacity of 200,000 tons of n-butane maleic anhydride of Puyang Shengyuan Energy Technology Co., LTD., located in Puyang City, Henan Province, has been put into production. After adding the original production capacity of 80,000 tons, the production scale of the enterprise has reached 280,000 tons. Surpass Guangdong Huizhou Yuxin New Materials Co., Ltd. 150,000 tons maleic anhydride production capacity to become the second largest maleic anhydride manufacturer in the country and the world.
Affected by this, the domestic maleic anhydride supply pattern quietly changed. First, the centre of gravity of production is moving north again. After the 200,000 tons of new production capacity of Puyang Shengyuan is put into operation, the maleic anhydride production capacity of Henan Province will account for 18.02% in 2023, an increase of 10.10 percentage points compared with 2022, surpassing Jiangsu and Guangdong provinces and becoming the second largest maleic anhydride production place in China after Shandong Province (Figure 1), which also indicates that the industry competition in East, central and North China and other related regions will be more intense; Second, industry concentration continues to increase. To measure the level of market concentration of CR5 (the market share of the top 5 enterprises in the industry) data, after Puyang Shengyuan 200,000 tons of new production capacity is fully put into operation, as of August 2023, China’s maleic anhydride production enterprises CR5 concentration has reached 63.79%, an increase of 9.86 percentage points from 2022. It is a significant increase of 31.92 percentage points compared with 2014 a decade ago.
Behind the improvement of industry concentration – process iteration and competitive pressure
The improvement of concentration level is an inevitable phenomenon when an industry develops to a certain extent. Through large-scale production, production enterprises can maximize the effective use of various resources to reduce the production cost of the whole industry, reduce various pollutants and carbon emission intensity, which is also one of the main development trends of China’s chemical industry in the future. At the same time, for the leading enterprises in the industry, a higher degree of concentration can also strengthen the pricing right of the enterprise itself, so that the market can not become a pure buyer’s market even in the period of oversupply. Behind the rapid increase in the concentration level of China’s maleic anhydride industry in the past decade, it is mainly driven by multiple rounds of industry reshuffle brought by process iteration, industry competition and other factors, which is reflected in the reduction in the number of enterprises and the increase in capacity scale.
From the perspective of process iteration, due to the pressure of loss, environmental protection and other aspects, the domestic phenylmaleic anhydride production capacity has continued to withdraw from the market in the past decade, and most of the production units dominated by small and medium-sized enterprises have been dismantled or transformed to produce naphthalene phenylanhydride and other products, with only a small number of idle devices remaining; From the perspective of industry competition, in addition to the production process competition, as a cyclical product, since 2014, China’s maleic anhydride industry has experienced five rounds of strong and weak cycle market conversion, even the n-butane method production enterprises have been in the loss for a long time, and under the pressure of business, Some n-butane process enterprises with poor competitiveness in terms of production scale and geographical location also withdrew from the market.
Through data comparison, the number of maleic anhydride production enterprises in China in 2014 was 35, and the average production capacity of enterprises was about 50,100 tons. In terms of phenyl-maleic anhydride, there are 24 production enterprises, with the production capacity accounting for 70.12% of the total production capacity. The head enterprise is Tianjin Zhonghe Chemical Co., LTD., with an annual capacity of 160,000 tons; So as of August 2023, the number of maleic anhydride production enterprises in China has been reduced to 24 and only 18 n-butane process enterprises are in production, and the average production capacity of enterprises has increased to about 74,000 tons, if only calculated in the production of n-butane process enterprises, the average production capacity is about 85,600 tons. In terms of phenylmaleic anhydride, there are only 7 production enterprises left and they have basically stopped production, and the production capacity accounts for only 13.29% of the total production capacity. The current head enterprise is Qixiang Tengda Chemical Co., LTD., with an annual capacity of 400,000 tons.
There is still much room for improvement in industry concentration in the future
With the slowdown of downstream demand growth, since 2022, the domestic maleic anhydride market has once again entered a new round of overcapacity cycle. In order to maximize their strength to cope with market competition pressure, expanding maleic anhydride production scale and carrying out forward or backward layout along the industrial chain have become the common choice for most manufacturers in the future development. Large-scale, large-scale, integration has become the main development trend of China’s maleic anhydride industry in the future, in this context, China’s maleic anhydride industry concentration level will continue to improve space. The main performance is that only in the second half of 2023, there will still be about 260,000 tons of new capacity to be put into production, and by the end of 2023, the CR5 concentration of maleic anhydride industry will reach a level near 70%.
In addition, the scale of maleic anhydride projects proposed in the next five years is generally large, and while reshudling the TOP production enterprises, it will also increase the survival pressure of small and medium-sized production devices with an annual capacity of less than 100,000 tons. According to Zhuo Chuang information statistics, as of August 2023, there are still 38 proposed projects in China’s maleic anhydride market in the next five years, with a total capacity of 8.25 million tons and an average capacity of 217,000 tons. Among them, there are only three enterprises with a capacity of more than 500,000 tons, and 100,000 to 300,000 tons of projects are the mainstream of production, accounting for 60.53% of the total.
Therefore, in the long run, the mass entry of large-scale production enterprises will certainly impact the original pattern of the industry. On the one hand, the entry threshold of mainstream enterprises may be increased to 200,000 tons or even more than 300,000 tons, and the market influence of individual TOP enterprises may no longer exist; On the other hand, in the face of the cost advantages owned by large-scale production enterprises, some small and medium-sized production enterprises with insufficient competitiveness will have the risk of delisting, and the maleic anhydride industry concentration will also increase simultaneously.