On June 3, 2025, Wanhua Chemical’s Yantai Industrial Park’s first phase ethylene unit with an annual capacity of 1 million tons slowly stopped operation, marking the official start of a 5-month shutdown and upgrade project.
This decision may seem to affect short-term production capacity, but it is actually a strategic layout by the company based on cost optimization, technological upgrades, and enhancing industrial chain competitiveness. Through adjustments in raw material structure, deepening international cooperation, and global resource allocation, Wanhua Chemical is trading short-term pain for long-term development momentum, laying a solid foundation to meet future market demands.
Since the launch of Wanhua Chemical’s first petrochemical project in 2016, propane has been the raw material for ethylene production. However, after the outbreak of the Russia-Ukraine conflict in 2022, prices in the petrochemical raw materials market fluctuated greatly, and the profitability of the propane raw material route sharply deteriorated. By 2024, propane prices rose by 35% year-over-year, contrasting sharply with the continuous low price of ethane due to the U.S. shale gas revolution. Data shows that at this time, the cost advantage of the ethane route expanded to 1,200 yuan/ton, a significant price difference that made ethane stand out as the preferred raw material for ethylene production.
The core of the technical transformation of Wanhua Chemical’s first-phase ethylene unit is to switch the raw material from propane to ethane. According to the environmental impact assessment report, ethane cracking for ethylene production shows remarkable advantages: a yield of up to 80%, nearly double that of the propane route; energy consumption per unit product decreases by 20%, and carbon emissions reduce by 15%. From both economic and environmental perspectives, ethane demonstrates enormous potential.
In fact, Wanhua Chemical had long foresaw this raw material shift. As early as 2016, the company began reserving technology for ethane-to-ethylene production. The “Raw Material Diversification Renovation Project Environmental Impact Assessment Report” released in June 2024 reveals that the renovated unit will adopt a dual-process route combining UOP Oleflex propane dehydrogenation and ethane cracking, equipped with a flexible production system that enables rapid raw material switching. This technical arrangement achieves a “two-birds-with-one-stone” effect: the company can fully enjoy the low-cost dividends when ethane supply is sufficient and prices favorable, and quickly switch back to the propane route during extreme market changes to ensure production stability, forming a robust “double insurance” mechanism.
Global ethane resources are highly concentrated. The United States, with its abundant shale gas resources, accounts for 56% of global ethane production, followed by the Middle East at 29%. However, despite seemingly abundant resources, access is quite difficult. Influenced by factors such as Sino-U.S. relations, obtaining ethane resources from the U.S. is fraught with uncertainty. Although the Middle East has abundant ethane resources, its industrial chain is highly closed, with most ethane used for domestic ethylene production and little exported.
For companies like Wanhua Chemical eager to secure ethane resources, breaking through supply bottlenecks is no easy task. To this end, Wanhua Chemical has formulated a “trinity” strategy, actively seeking solutions:
On April 25, 2025, Kuwait Petroleum Corporation (KPC) invested $638 million to acquire a 25% stake in Wanhua Chemical’s Yantai Petrochemical subsidiary. This move is a heavyweight step: it is the largest investment by a Middle Eastern company in China’s petrochemical sector and a key step for Wanhua Chemical to secure ethane supply. Looking back at the cooperation history, Wanhua Chemical became the first Chinese company to directly purchase Middle Eastern LPG in 2013, and this equity cooperation further elevates their partnership, successfully locking in an annual supply of 1 million tons of ethane.
After resolving the resource supply source, transportation is equally critical. Drawing on satellite chemical companies’ successful experience, Wanhua Chemical partnered with Abu Dhabi National Oil Company (ADNOC) to establish AW Shipping. On the morning of July 23, 2024, Jiangnan Shipbuilding under China State Shipbuilding Corporation and China Ship Trade jointly held the signing ceremony for the transfer contracts of 2+2 very large ammonia carriers (VLAC) of 93,000 cubic meters and 9 very large ethane carriers (VLEC) of 99,000 cubic meters for AW Shipping.
Each of these massive ships can carry 50,000 cubic meters of liquid ethane at -88.6°C. This specialized transportation reduces single-trip shipping costs by 40% compared to traditional methods, greatly improving efficiency, lowering transportation costs, and ensuring stable ethane transport.
At the Fujian base, Wanhua Chemical, Nordic Chemical, and Borui Chemical jointly established a joint venture to build a 1.6 million ton/year specialty polyolefin unit. This project uses advanced Borstar? patented technology. Its cleverness lies in fully consuming the by-product hydrogen generated during ethane cracking, utilizing what might otherwise be wasted, forming a complete and efficient “ethane - ethylene - high-end polyolefin” closed-loop industrial chain.
This means that switching raw materials from propane to ethane is not just a simple substitution but brings many opportunities for extending Wanhua Chemical’s industrial chain. During ethane cracking for ethylene production, every ton of ethylene generates 80 kg of by-product hydrogen. Wanhua Chemical keenly identified this resource advantage and plans to build a 200,000-ton/year hydrogen purification unit at the Yantai base, purifying the by-product hydrogen to 99.999% high purity, supplying high-quality hydrogen for the fuel cell industry, opening new business fields.
Meanwhile, as ethylene production increases due to the raw material switch, surplus ethylene will be used to expand markets for high-end materials such as EVA and POE:
Wanhua Chemical plans to build a 300,000 ton/year photovoltaic-grade EVA unit, adopting advanced ExxonMobil slurry process technology. The product’s light transmittance reaches 94%, perfectly meeting the stringent requirements of TOPCon battery encapsulation, strongly supporting the photovoltaic industry’s development.
The company has formed a strong partnership with Covestro to jointly develop a 50,000 ton/year PC/PBT alloy project. This new material is applied to new energy vehicle battery pack brackets, achieving a significant weight reduction of up to 40% compared to traditional metal solutions, contributing innovative strength to automotive lightweight development.
These arrangements align highly with Wanhua Chemical’s overall “ethane - ethylene - new materials” strategy. Professional estimates suggest that by 2027, the ethane route will contribute 30% of profit growth, boosting the petrochemical segment’s gross margin from 12% to 18%, becoming a key driver for the company’s future performance growth.
During the 5-month shutdown and upgrade of the first-phase ethylene unit, Wanhua Chemical did not let market supply form a “vacuum.” The company maximized market supply assurance through the “maintenance window off-peak + capacity gradient replacement” strategy.
At the Yantai Industrial Park, during the first phase unit shutdown, the second-phase 1.2 million ton/year unit operated at full capacity.
On April 3, 2025, Wanhua Chemical announced that its Yantai Industrial Park’s 1.2 million ton/year ethylene unit successfully produced qualified ethylene products on the first try, marking the successful start-up of the second phase project.
Notably, the second phase unit uses Honeywell UOP technology with flexible raw material ratio adjustment capabilities. When ethane supply is tight, it can quickly switch to LPG/naphtha mixed feed to maintain stable production, complementing the first-phase shutdown effectively, ensuring ethylene and downstream product supply remains largely unaffected.
