PBAT production capacity surged, and upstream prices followed suit. Affected by the nationwide implementation of the plastic restriction order, the domestic market demand of PBAT has soared since December 2020, and the demand exceeds the supply, and the number of new enterprises has increased. At the beginning of 2021, the domestic PBAT production capacity was 687,000 tons, and the planned production capacity was 4.633 million tons. In just four months, up to now, PBAT production capacity has soared to 7.398 million tons. The synthetic route of PBAT is shown in the above figure, and the raw materials are adipic acid (AA), terephthalic acid (PTA) and butanediol (BDO). Among them, BDO has the highest proportion of raw materials and is the lifeblood of PBAT industry. 1. BDO BDO is mainly used to produce PTMEG, CBL, PU, PBT, PBS, etc. With the rise of spandex and PBAT industries and the forced shutdown of foreign manufacturers caused by the epidemic, the supply of BDO began to be tight in the second half of last year, and the price suddenly increased by more than three times, setting a new high in 12 years. At the beginning of March this year, BDO rose to about 31,000 yuan, and the price fell below 25,000 on May 4. According to statistics, in 2020, the production capacity of major domestic BDO manufacturers is about 2.4 million tons, and the output is about 1.6 million tons. Moreover, most enterprises that produce BDO are internally digested and supplied to their industrial chains, so it is difficult to sell them to the market. Among many enterprises, Xinjiang Meike and Xinjiang Tianye are not equipped with many downstream equipment, and their BDO production is mainly for export, which is the main supplier of the market. In the past, the domestic supply of BDO was relatively surplus, and the profit of the industry was also sluggish for a long time. However, with the nationwide implementation of plastic restrictions, domestic PBAT projects have mushroomed, and the production capacity currently under construction and existing has exceeded 7 million tons, which may continue to increase in the future. If all the planned PBAT projects are put into production, the incremental demand for BDO will exceed the total existing capacity. 2. PTA After 2016, the PTA market began to recover in the supply-side reform. In 2016-2018, 2.2 million tons of capacity of Tongkun Petroleum was released. In 2019, Sichuan Nengtou and Xinfengming Plant were put into operation. In 2020, Hengli Petrochemical Line 5, Xinfengming Phase 2 and other enterprise layouts were put into operation one after another, making the total PTA capacity reach 56.96 million tons/year, further increasing the possibility of overcapacity. PTA domestic part of the proposed capacity. In the next few years, with the continuous production of production devices, the production capacity of PTA will be further expanded by 27.2 million tons/year, and all of them are large-scale devices of head enterprises, so the cost will be significantly reduced and the industry concentration will be further improved. 3. Adipic acid (AA) The main downstream applications of adipic acid are concentrated in PU slurry, sole stock solution, other elastomers, PA66 and so on. At the same time, the rise of PBAT industry can also digest some production capacity. From 2016 to 2020, China's AA production capacity increased from 2.385 million tons/year to 2.71 million tons/year, with a compound annual growth rate of 3.25% in four years; In the same period, the operating rate has been at a low level for a long time, from 52.58% to 56.58%, and the situation that the supply far exceeds the demand has not been improved. Affected by the epidemic, adipic acid also ushered in a wave of price increases at the beginning of this year. There are many manufacturers with adipic acid in the world. By the end of December 2020, the total production capacity of adipic acid in the world was about 4.908 million tons/year, and that in Asia was 3.04 million tons/year, making it a major supplier in the world. PBAT downstream application prospect In 2020, the apparent consumption of PE will be 36.8 million tons, of which about 53% will be used for film products, so the consumption of film products will be 19.5 million tons. Among them, shopping bags, agricultural films and take-away packaging bags, which are strictly controlled by the plastic ban, consume more than 9 million tons a year in China. At present, the annual consumption of degradable plastics in China is about 550,000 tons, and the market scale is about 11 billion yuan. The replacement rate of non-degradable plastics is only 1.2%. If the plastic ban is further strictly enforced, the demand for PBAT will further increase in the future, and PBAT will become the mainstream plastic product with broad development prospects. According to TF Securities's calculation, after the implementation of the policy, the demand for degradable plastics in the three fields of take-away, express delivery and agricultural film will reach 1,545,300 tons in the future, corresponding to the degradable plastics market of about 27 billion yuan. Compared with the current market demand of 42,000 tons in China, the market growth space is 36 times.