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Upstream and Midstream Development of Dye Intermediates Industry

1. Upstream: The price of petrochemicals directly affects the procurement cost of the dye intermediates industry


The upstream of dye intermediates industry is the petrochemical industry. The petrochemical industry is a basic industry in the national economy and occupies a pivotal position in the national economy. The petrochemical industry is resource-intensive, capital-intensive, and technology-intensive, with high industrial relevance, large economic aggregates, and large fluctuations in petrochemical product prices, which directly affect the procurement costs of the industry.


The factors affecting the fluctuation of petrochemical raw material prices are complex, involving political, economic, and other factors, which are beyond the control of enterprises. Only companies that develop and produce high-value-added products can relatively offset the pressure of rising costs.


According to the National Bureau of Statistics of China, the producer price index PPI of the oil and gas extraction industry has continued to decline since 2017 and is only 72.6 in 2020. The ex-factory prices of products in the petroleum industry continued to decline. Petroleum is an important raw material that dye intermediate producers need to purchase in the process of producing intermediates, and the decline in its price is conducive to reducing the production cost of dye intermediates.


2. Midstream: the output of dye intermediates rises


The output of dye intermediates in China ranks first in the world. According to the statistics of the China Dyestuff Industry Association, the output of dye intermediates in 2019 was 463,000 tons, an increase of 26,000 tons or 5.95% over 2018. From 2015 to 2019, the output of dye and pigment intermediates increased from 320,000 tons to 463,000 tons, with a compound annual growth rate of 7.03%; a preliminary estimate of 510,000 tons in 2020.


The market for dyestuff intermediates tends to be an oligopolistic industry. The proportion of the industry affects the layout of the integrated industrial chain. The production capacity of dyes and dye intermediates has a large proportion, and the pricing power is relatively large.


H acid, the full name of 1-amino-8-naphthol-3,6-disulfonic acid, is an important intermediate of azo dyes; para-ester is an important intermediate of reactive dyes, used to synthesize EF type, KN type, M/KM type, ME type and other reactive dyes containing vinyl sulfone. It plays a key role in dye manufacturing. It is mainly used to produce acid and reactive dyes. There are various types and are widely used in the field of textile printing and dyeing.


China is the world's largest producer of H acid. Since 2015, China's environmental protection policies have become increasingly stringent. As a serious polluting industry, H acid has been closely watched by the environmental protection department. Many small and medium-sized enterprises have not met the environmental protection requirements and have been eliminated one after another. Leading enterprises have also been affected, and the operating rate has dropped sharply. The reshuffle of the industry intensified, backward production capacity was gradually eliminated, and the construction of new technology production lines began to increase.


Due to the great changes in production capacity in the short term, in 2018, the environmental protection policy continued to advance, and the annual average operating rate of leading enterprises in the H acid industry was extremely low. The output of H acid dropped sharply, the market supply was tight, and product prices began to rise.