Wanhua Chemical Adds Another "Giant Vessel"!

On August 14th, AW Shipping, a joint venture between Wanhua Chemical and ADNOC L&S, announced that it has taken delivery of the very large ethane carrier (VLEC) named "GAS YONGJIANG" from Jiangnan Shipyard. This vessel is the first one delivered under the 9-VLEC construction agreement signed by the two parties in July 2024, with the total value of the order being approximately 1.9 billion US dollars (equivalent to 13.8 billion yuan). According to statistics, through various methods such as self-construction and joint venture operation, Wanhua Chemical has now accumulated and controlled the capacity resources of 15 VLECs. This will strongly support the diversified adjustment of the raw material structure for its ethylene plants and further consolidate the company's competitive strength in the "ethane-ethylene" industrial chain.

For a long time, Wanhua Chemical mainly used propane as the raw material for ethylene production. However, since the outbreak of the Russia-Ukraine conflict, the profitability of the propane route has been under significant pressure. In order to maintain cost competitiveness in the development of new material businesses such as POE (Polyolefin Elastomer) and Nylon-12, Wanhua has begun a strategic shift to ethane as a raw material. Nevertheless, this feedstock switch is not a simple process replacement, but a systematic project involving global resource integration and industrial chain restructuring.

In terms of imports, the global ethane supply is mainly concentrated in North America and the Middle East. If purchasing from North America, enterprises need to build supporting receiving facilities and deal with uncertainties caused by changes in trade policies. For example, satellite chemical's ethane carriers once had to be rerouted to India temporarily due to Sino-US tariff issues. If importing from the Middle East, it usually requires in-depth collaboration with local enterprises through means such as establishing joint ventures, conducting technical cooperation, or signing long-term supply agreements. On April 25th this year, Wanhua Chemical officially signed a joint venture agreement with Petrochemical Industries Company (PIC) of Kuwait. PIC acquired a 25% stake in Wanhua Chemical (Yantai) Petrochemical Co., Ltd., a subsidiary of Wanhua Chemical, with an investment of 638 million US dollars. Prior to this, Wanhua had already become the first domestic enterprise to directly participate in the distribution of LPG (Liquefied Petroleum Gas) resources in the Middle East by virtue of the long-term LPG supply agreement signed with Kuwaiti enterprises, successfully opening up an energy channel from the Persian Gulf to the Bohai Sea region in China.

In the transportation link, since ethane needs to be liquefied for storage and transportation under a low-temperature condition of -88.6°C, its logistics cost is significantly higher than that of propane (-42.1°C) and natural gas (-161.5°C). The "GAS YONGJIANG" delivered this time has multi-gas transportation capabilities and can carry products such as ethane, ethylene, and LPG. It particularly features no liquid level loading restrictions and low maintenance costs, and is regarded as an ideal vessel type for long-distance ethane transportation.

From the perspective of product structure, although ethane cracking to produce ethylene has obvious advantages in terms of cost and carbon emissions—with milder reaction conditions, lower energy consumption, and fewer by-products, which helps enterprises achieve energy conservation and carbon reduction—its products are mainly ethylene, with very low yields of propylene and heavier components, while accompanied by a large amount of hydrogen. Therefore, the product structure of this route is relatively single. Although it has strong short-term profitability, it may face limitations in the extension width of the industrial chain and insufficient ability to resist market fluctuations in the long run. How to efficiently utilize the by-product hydrogen has become one of the key variables affecting the overall economic benefits of the ethane route.

If the switch to ethane as a raw material is successful, chemical enterprises will gain more significant cost advantages and supply guarantees in the following new materials fields: