2013-08-30 08:59:45 - New Energy market report from Business Monitor International: "China Petrochemicals Report Q3 2013"
The Chinese petrochemicals sector is seeing slightly more robust growth, particularly in olefins, but this is insufficient to absorb ongoing increases in capacities. Combined with feedstock cost rises, this will cause a narrowing of margins. However, coal-to-methanol production should ease the situation over the medium term and reduce net imports in some segments.
The total value of petrochemical production in China grew 11.6% y-o-y to CNY1.72trn during the first two months of the year with the value of imports rising 24.1% to US$19.6bn and exports growing 5% to US $13.8bn. In the first four months of the year, ethylene output rose by 3.3% y-o-y to 5.3mn tonnes while primary plastics output grew 9.6% to 18.27mn tonnes and plastic products output rose
by 2.2% to 18.96mn tonnes. Growth in ethylene output came after a dismal performance in 2012, when production fell by just over 2% to under 15mn tonnes, in spite of 20% growth in cracker capacity to 21.56mn tonnes.
Full Report Details at
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Growth in ethylene demand over the medium-term should lead to consumption rising above 40mn tonnes by 2017, fuelled in a large part by consumption of LLDPE. PE production will account for around 58% of overall ethylene demand. Meanwhile, ethylene capacity in China will increase to 33.7mn tpa by 2017, a rise of 56% on 2012 volumes. This includes 5.6mn tpa based on CTO processes at 10 projects - either under construction or being planned. Six conventional integrated petrochemical complexes will add a further 4.6mn tpa by 2015. A further 5.75mn tpa will be available once other projects are completed in 2016. These include: a 1.5mn tpa methanol-to-olefins facility at Ningxia, which is being planned by Shenhua; a CNOOC-Shell JV's 1mn tpa ethylene complex at Guangdong; two 1mn tpa ethylene plants planned by PetroChina - to be located at Yangzhou and in eastern China; a 1mn tpa ethylene JV at Hainan; Qingdao Petrochemicals' 1mn tpa ethylene plant at Qingdao; and Dalian Petrochemicals' 1mn tpa plant at Dalian.
BMI has revised the following forecasts/views:
* Capacity increases include Sinopec's Wuhan Petrochemicals' new 800,000tpa ethylene cracker at end- June 2013 with downstream capacity of 280,000tpa MEG, 300,000tpa HDPE, 300,000tpa LLDPE and 400,000tpa PP. This has raised fears that an increase in supply could weigh on polymer prices. In addition to Wuhan, there are joint venture PE and PP plants of Sinopec and SK Energy that are expected to start up in end-May and Sichuan Petrochemical's new plants in July. This will ensure that polymer price rises will remain modest as demand growth will still remain weak in historical terms.
* Ethylene margins are set to diminish over the medium-term amid rapid capacity expansion and fierce competition from cheaper output from the Middle East. Coal-to-methanol will form the basis of China's response, offering to counter-balance the effects of rising feedstock prices and enable Chinese producers to compete effectively with the Middle East. Although not all proposed crackers will come onstream, BMI expects ethylene capacity to surge from 21.56mn tpa in 2012 to 33.70mn tpa in 2017. This will narrow the shortfall in local production and demand to about 7.8mn tpa in 2017 from an expected 11.4mn tpa in 2013.
* In BMI's Asia Petrochemicals Risk/Reward Ratings (RRRs) matrix, China scores 80.5 points - unchanged from the previous quarter. It is in second place, 0.9 points behind South Korea and 0.4 points ahead of Japan; any decline in China's risk scores could push it into third place. The country's falling ratings in recent quarters mirror the deterioration of its external environment, which has brought into focus the country's structural weaknesses, including heavy reliance on imported feedstock and overcapacity in some segments.
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