"China Petrochemicals Report Q2 2011" is now available at Fast Market Research

PRLog (Press Release)– Mar 21, 2011– Chinese petrochemicals output should continue to exhibit strong growth in 2011, but investment in the industry will be increasingly driven towards consolidation and boosting value of production, according to BMI's latest China Petrochemicals Report.

Demand has been healthy in the Chinese market with PE demand up 13% y-o-y to 17.4mn tonnes in 2010, while PP grew 6% to 13.9mn tonnes. This made China by far the world's largest polymer consumer and importer. Imports included 1.38mn tonnes LDPE (up 3%), 2.48mn tonnes LLDPE (up 13%), 3.50mn tonnes HDPE (down 9%) and 4.80mn tonnes PP (down 6%). New domestic capacity helped reduce inflows of HDPE and PP.

In 2010, China Petrochemicals Corporation (Sinopec)'s ethylene output grew 35% y-o-y, to 9.06mn tonnes, while plastic and resins output grew 26% to 13mn tonnes. Output of synthetic rubbers rose by nearly 10% to 967,000 tonnes while fibres output grew 7% to 1.4mn tonnes. However, Sinopec's urea output slumped 30% to 1.22mn tonnes. Sinopec, however, reported a drop in urea production by 30%, to 1.22mn tonnes. The company's refinery throughput was up 13%, at 211.13mn tonnes, and output of light chemical feedstock was 30% higher at 35mn tonnes.

In the first 11 months of 2010, ethylene output grew 35.5% y-o-y, to 12.89mn tonnes, primary plastics grew 19.1% y-o-y, to 38.77mn tonnes and plastic products grew 20.9% y-o-y, to 53.59mn tonnes. The growth trend was consistently upwards throughout 2010, indicating that a recovery was being sustained, despite the rapid rise in production in the Middle East and a large polymer inventory at the beginning of the year. However, key polyolefins consuming industries are experiencing the effects of tightened 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 s buick trong growth levels.

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. In terms of polymer capacities, we estimate that PE capacity grew by 1.65mn tpa and PP capacity grew 1.45mn tpa in 2010, ensuring that polymer market self-sufficiency should approach 75% PE and exceed 100% PP in 2011.

In the Asia Petrochemicals Business Environment Ratings matrix, China's score is 79.1 points, up 0.5 point since the previous quarter owing to an improvement in country risk scores. With South Korea's score declining in 2010, China has moved from third to second place in the regional ranking, just 0.5 points behind Japan and 1.1 points ahead of South Korea. Although China's petrochemicals market ratings are the highest in Asia, it remains weighted down by a relatively poor financial and trade infrastructure and negative risks specific to the petrochemicals sector, namely reliance on imported feedstock and overcapacity in some segments.

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