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China Petrochemicals Report Q4 2011
Business Monitor International, Sep 2011, Pages: 82
China Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on China's petrochemicals industry.
The Chinese petrochemicals industry will continue to grow despite slower growth in domestic consumption as the country becomes increasingly self-reliant up the value chain, according to BMI’s latest China Petrochemicals Report.
In H111, the output value of the Chinese chemical and petroleum industry increased 34.4% y-o-y, to CNY5.32trn (US$826bn). The industry accounted for 13.4% of the country’s total industrial output value.
However, the industry is expected to slow down in H211 with the government projecting an annual value of CNY10trn and full-year profits of CNY900bn, up 28.5% y-o-y. In the first seven months of the year, the output volume of ethylene rose 16.9% y-o-y, to 9.16mn tonnes, plastic in primary forms was up 9.7% y-o-y, to 26.58mn tonnes, chemical fibres grew 16.2% y-o-y, to 19.07mn tonnes, and plastic products grew 19.0% y-o-y, to 29.11mn tonnes. The moderation in output is related in part to the tightening lending conditions amid government efforts to combat inflation. This situation has primarily affected the construction and automotive sectors, which had made orders on the basis of assumptions of strong growth levels.
Forward-looking metrics such as the purchasing managers’ indices and raw materials imports paint a slightly more subdued picture of growth. Meanwhile, negative growth in vehicle sales suggests the consumer picture may not be as rosy as the headline figures suggest. This subdued outlook will inevitably mean that orders for chemical and petrochemical products will experience low growth over H211 and into H112. As such, our outlook is more pessimistic than in the previous quarter when we anticipated a recovery in H211.
China's annual PE demand is expected to grow by 8-9% in 2011, but new capacity will reduce imports by up to 14% from the 7.4mn tonnes imported in 2009, although this will be more at the expense of neighbouring Asian states while Middle Eastern suppliers will be unaffected. According to Chinese customs statistics, the country’s imports of plastics in primary forms declined 6.2% y-o-y in volume although they increased 8% y-o-y in value in the first seven months of the year, while exports of plastic products grew 5.9% in volume and 21.6% in value over the same period. The trend demonstrates both the slowdown of domestic demand coupled with increased self-sufficiency in plastics.
Under the petrochemical stimulus plan, China aims to boost its annual crude oil processing, fuel output and ethylene output to 405mn tpa, 247.50mn tpa and 15.5mn tpa by the end of 2011. BMI believes that, on the basis of current projects, China will have ethylene capacity of 17.91mn tpa by the end of 2011. Sinopec is strengthening its position as a leading chemicals producer with 2mn tpa of ethylene capacity added to its operations in 2010, lifting capacity to 9.5mn tpa. It forecasts ethylene capacity of 12-13.5mn tpa by 2015 with three additional refinery and petrochemicals complex planned by 2015 and the upgrading of existing refinery and chemical operations while eliminating chemical operations with poor profitability. A further surge in capacity is expected in 2016 as a range of coal-to-olefins complexes come onstream.
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