Propionic acid is an oily liquid that is colorless and has a pungent odor. It is non-toxic, flammable, and corrosive. It is a short-chain saturated fatty acid and can be miscible with water, ethanol, chloroform, and ethyl ether.
Propionic acid has a relatively strong bactericidal effect, a good regulatory effect on body metabolism, and excellent high-temperature resistance. It is an important organic synthesis raw material and fine chemical intermediate. It can be directly used as a preservative and mildew inhibitor for food and feed and is widely used in the preparation of propionic acid derivatives such as propionates, propionic esters, chloropropionic acid, and propionic anhydride. Meanwhile, it is also used in the synthesis of pesticides and pesticide intermediates, pharmaceutical intermediates, and fragrance intermediates.
On July 21, 2023, the Ministry of Commerce issued Announcement No. 25 of 2023 and decided to initiate an anti-dumping investigation into imported propionic acid originating from the United States. On April 19, 2024, the investigating authority issued a preliminary ruling announcement, preliminarily determining that the investigated products were being dumped. After that, the investigating authority continued to investigate the dumping and the margin of dumping, the injury and the degree of injury, as well as the causal relationship between dumping and injury.
On July 19, 2024, the Ministry of Commerce issued the “Announcement on the Final Ruling of the Anti-dumping Investigation on Imported Propionic Acid Originating from the United States”. It was determined that the investigated products were being dumped, that the domestic propionic acid industry had suffered substantial injury, and that there was a causal relationship between the dumping and the substantial injury. According to the provisions of the “Anti-dumping Regulations”, the Ministry of Commerce submitted a proposal to the Tariff Commission of the State Council to levy anti-dumping duties. Based on the proposal of the Ministry of Commerce, the Tariff Commission of the State Council made a decision to levy anti-dumping duties on the investigated products starting from July 21, 2024. That is, an anti-dumping duty of 43.5% will be levied on imported propionic acid originating from the United States.
The results of this anti-dumping investigation will directly benefit domestic propionic acid production enterprises in China. Driven by the anti-dumping policy and the steadily growing domestic demand, it is expected that the operating rate of the propionic acid industry will gradually recover, and the product prices and industry profits will also gradually increase.
Global Propionic Acid Market Analysis
In 2023, the global total production capacity of propionic acid reached 510,000 tons per year, and the total output was approximately 332,000 tons. The average operating rate of the industry was 65%.
The propionic acid industry has relatively high technological barriers and a high degree of global concentration. There are five major production enterprises, and the production capacity is concentrated in countries and regions such as the United States, Western Europe, and China. Among them, BASF (including the joint venture Yangzi BASF) is the world’s largest propionic acid production enterprise, with a production capacity of 219,000 tons per year, accounting for approximately 43% of the global total production capacity. In the early days in China, there was only one propionic acid production enterprise, the joint venture Yangzi BASF. Later, with the expansion of propionic acid production by Yangzi BASF and the commissioning of the propionic acid plant of Luxi Chemical, China’s proportion in the global propionic acid production capacity has gradually increased.
From 2019 to 2023, the global demand for propionic acid increased from 291,000 tons to 332,000 tons, with a compound annual growth rate of 3.4%. From the perspective of the consumption structure, grain, feed, and food preservation and mildew inhibition are the largest consumption areas of global propionic acid; followed by the preparation of propionate series products; the consumption proportion in the field of pesticides and their intermediates is relatively small. It is expected that in the future, on the premise of the continuous growth of global food and animal feed production, the demand for propionic acid and propionates in the field of food and feed preservatives will grow steadily, which will play a decisive role in the growth of global propionic acid consumption.
From the perspective of the consumption area, global propionic acid consumption is mainly concentrated in Western Europe, China, and the United States, with consumption proportions of 40%, 25%, and 21% respectively. The reason is that in addition to being used as a preservative and mildew inhibitor for grains, feeds, and foods by itself, the downstream propionate products of propionic acid can also be used as preservative additives for food and feed, such as sodium propionate and calcium propionate. Western Europe, China, and the United States are the main producing and exporting countries of propionates and have a relatively large demand for propionic acid.
From the perspective of global trade, currently, global propionic acid mainly flows from the United States to Western Europe and China. The United States is the country with the largest export volume of global propionic acid, and Western Europe is the region with the largest import volume of global propionic acid. In recent years, with the gradual expansion of China’s propionic acid production capacity, China has gradually changed from a net importer of propionic acid to a net exporter.
Current Situation and Forecast of Propionic Acid Production in China
(1) Current production situation
From 2019 to 2023, China’s total production capacity of propionic acid increased from 77,000 tons per year to 167,000 tons per year, and the new production capacity came from Luxi Chemical and Yangzi BASF.
From 2019 to 2023, China’s total output of propionic acid increased from 50,000 tons to 92,000 tons. Among them, in 2020, due to the impact of the COVID-19 pandemic, the output dropped to 45,000 tons. At present, there are a total of four propionic acid production enterprises in China, concentrated in Jiangsu and Shandong provinces. Yangzi BASF is currently the propionic acid production enterprise with the largest production capacity in China, with a production capacity of 109,000 tons per year.
(2) Production capacity forecast
According to the statistics of existing projects under construction and proposed projects, there are no new entrants in China’s propionic acid industry for the time being, and the future new production capacity will mainly come from the expansion of existing enterprises.
Current Situation and Forecast of Propionic Acid Import and Export in China
In terms of import and export volumes, from 2019 to 2023, China’s import volume of propionic acid decreased from 27,000 tons to 15,000 tons, and the export volume increased from 7,000 tons to 23,000 tons. In 2020, China’s import volume of propionic acid reached the highest point of 36,000 tons, and the export volume was at the lowest point of 5,000 tons, mainly due to the impact of the COVID-19 pandemic, which led to a relatively low average operating rate of Chinese enterprises. After that, with the commissioning of the propionic acid plant of Luxi Chemical, the supply of propionic acid in China increased, and China gradually changed from a net importer of propionic acid to a net exporter. At present, more than 80% of the propionic acid imported by China comes from the United States, and the rest comes from Belgium (the place of origin is mainly Germany); while the main export destinations include India, Russia, South Korea, Brazil, Taiwan, China, Thailand, Australia, Singapore, Colombia, Malaysia, Vietnam, and Japan.
In terms of import and export prices, from 2019 to 2023, the average export price of propionic acid in China was higher than the average import price. In 2023, the import and export prices of propionic acid in China reached the lowest level in nearly five years. It is expected that in the future, with the continuous improvement of the quality of domestic propionic acid products and the gradual normalization of the production capacity of new plants, the supply of propionic acid in China will be sufficient, and the export volume will continue to increase. Meanwhile, the results of the anti-dumping investigation initiated by the Ministry of Commerce on imported propionic acid originating from the United States may affect the import volume of propionic acid and further reduce it.
Analysis and Forecast of Propionic Acid Price and Industry Profit in China
From 2019 to 2020, the price of propionic acid in China did not change much, and the market price fluctuated around 10,000 yuan per ton (tax-inclusive price). From 2021 to 2023, the price of propionic acid in China continued to decline. On the one hand, it was due to the commissioning of the propionic acid production capacity of Luxi Chemical, which increased the supply of propionic acid in China; on the other hand, the low domestic selling price of imported American propionic acid products led domestic propionic acid production enterprises to continuously reduce prices for sales from 2022 to 2023. In 2023, the average price of propionic acid in China dropped to approximately 5,500 yuan per ton, and the industry was generally in a loss state.
American propionic acid has certain advantages in terms of raw material sources and costs. The price of American propionic acid products imported by China is significantly lower than that of domestic propionic acid, which is not conducive to the development of domestic propionic acid production enterprises. It is expected that in the future, with the support of the anti-dumping ruling, the price of propionic acid in China will rise steadily, and the product profit will also return to a reasonable range.
CCR’s View
Affected by the downstream demand and the price changes of bulk chemical products, the industrial scale of global and Chinese propionic acid has shown certain fluctuations in recent years, but generally presents a growth trend.
In terms of supply, from 2019 to 2023, the production capacity and output of propionic acid in China grew rapidly. The total production capacity increased from 77,000 tons per year to 167,000 tons per year, with a compound annual growth rate of 21%; the total output increased from 50,000 tons to 92,000 tons, with a compound annual growth rate of 16.5%; and the average operating rate of the industry declined to some extent. At present, there are only four propionic acid production enterprises in China, and the industry concentration is high. According to the existing planned projects, there will be no new entrants in the short term, and the production capacity increment is limited. It is expected that the competitive pattern of China’s propionic acid industry will not change much in the next period of time. Driven by the anti-dumping policy and the steadily growing domestic demand, it is expected that the operating rate of the industry will gradually recover.
In terms of demand, from 2019 to 2023, the consumption of propionic acid in China grew steadily, with the consumption volume increasing from 70,000 tons to 84,000 tons and an average annual growth rate of 4.5%. In the future, driven by the consumption demand for propionates and grain, feed, and food preservation and mildew inhibition, it is expected that by 2028, the consumption of propionic acid in China will reach 109,000 tons, with an average annual growth rate of 5.5%.
Overall, the supply pattern of the propionic acid industry is basically stable, the industry concentration is high, the consumption demand grows steadily, and cost competitiveness is the key competitive factor in the industry. There has already been a situation of overcapacity.
(Transferred from China Chemical News Weekly)
Ps: Heathy Chemical reserves the final right of interpretation for the article.
