BMI China Petrochemicals Report Q2 2011

www.businessmonitor.
com
Q2 2011
chiNa
petrochemicals report
INCLUDES BMI'S FORECASTS
issN 1749-219X
published by Business monitor international ltd.
CHINA PETROCHEMICALS REPORT Q2 2011

INCLUDES 5-YEAR FORECASTS TO 2015
Part of BMIs Industry Survey & Forecasts Series

Published by: Business Monitor International Copy deadline: February 2011
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China Petrochemicals Report Q2 2011
Business Monitor International Ltd
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CONTENTS
Executive Summary ......................................................................................................................................... 5 SWOT Analysis ................................................................................................................................................. 7
China Petrochemicals Industry SWOT................................................................................................................................................................... 7 China Political SWOT ........................................................................................................................................................................................... 8 China Economic SWOT ......................................................................................................................................................................................... 9 China Business Environment SWOT .................................................................................................................................................................... 10
Global Overview ............................................................................................................................................. 11

Petrochemicals Market Overview ........................................................................................................................................................................ 11 Financial Results ................................................................................................................................................................................................. 15 Global Oil Products Price Outlook...................................................................................................................................................................... 16 Table: Oil Product Price Assumptions, Q410-Q411 (US$/bbl)............................................................................................................................ 16 Table: Oil Product Price Data And Forecasts, 2008-2015 (US$/bbl) ................................................................................................................. 19
Emerging Asia Petrochemicals Overview ................................................................................................... 21

Table: Asian Ethylene Projects ............................................................................................................................................................................ 23
China Market Overview .................................................................................................................................. 24

Table: Chinas Petrochemicals Sector HDPE Capacity ................................................................................................................................... 24 Table: Chinas Petrochemicals Sector LDPE Capacity .................................................................................................................................... 25 Table: Chinas Petrochemicals Sector LLDPE Capacity .................................................................................................................................. 25 Table: Chinas Petrochemicals Sector PP Capacity ......................................................................................................................................... 26 Table: Chinas Petrochemicals Sector Cracker Capacity ................................................................................................................................. 28 Table: Chinas Petrochemicals Sector PVC Capacity ...................................................................................................................................... 29 Table: Chinas Petrochemicals Sector PS Capacity ............................................................................................................................................ 32 Energy Inefficiencies And Bottlenecks ................................................................................................................................................................. 32 Production ........................................................................................................................................................................................................... 33 Table: Chinas Supply And Demand Volumes Of Major Petrochemical Products ............................................................................................... 34 Table: Cracker Capacity, 2006-2013 (000tpa) ................................................................................................................................................... 36
Industry Trends And Developments ............................................................................................................ 37

Table: Chinas Petrochemicals Sector Ethylene Projects ................................................................................................................................. 37 Table: Chinas Petrochemicals Sector PE Projects .......................................................................................................................................... 38 Table: Chinas Petrochemicals Sector PP Projects .......................................................................................................................................... 39 Table: Chinas Petrochemicals Sector PS Projects .......................................................................................................................................... 39 Upstream ............................................................................................................................................................................................................. 40 Olefins ................................................................................................................................................................................................................. 41 Intermediates ....................................................................................................................................................................................................... 42 Integrated Projects .............................................................................................................................................................................................. 44 Coal-Based Chemicals......................................................................................................................................................................................... 49 Other Projects...................................................................................................................................................................................................... 50 Regulatory Developments .................................................................................................................................................................................... 51
Business Environment .................................................................................................................................. 54

Petrochemicals Business Environment Ratings ................................................................................................................................................... 54 Table: Asia Pacific Petrochemicals Business Environment Ratings .................................................................................................................... 54 Chinas Foreign Investment Policy ...................................................................................................................................................................... 56
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Foreign Trade Regime ......................................................................................................................................................................................... 57
Industry Forecast Scenario ........................................................................................................................... 59

Table: Chinas Petrochemicals Sector, 2007-2015 (000 tpa, unless otherwise stated)....................................................................................... 62 Macroeconomic Outlook...................................................................................................................................................................................... 63 Table: China Economic Activity; 2006-2015 .................................................................................................................................................... 66
Company Profiles ........................................................................................................................................... 67

China Petroleum & Chemical Corporation (Sinopec) ......................................................................................................................................... 67
Glossary Of Terms ......................................................................................................................................... 71

Table: Glossary Of Petrochemicals Terms .......................................................................................................................................................... 71
BMI Methodology ........................................................................................................................................... 72

How We Generate Our Industry Forecasts .......................................................................................................................................................... 72 Chemicals And Petrochemicals Industry ............................................................................................................................................................. 72 Cross Checks ....................................................................................................................................................................................................... 73 Business Environment Ratings ............................................................................................................................................................................. 74 Table: Petrochemicals Business Environment Indicators And Rationale............................................................................................................. 75 Weighting............................................................................................................................................................................................................. 75 Table: Weighting Of Indicators ........................................................................................................................................................................... 76
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Executive Summary
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 BMIs 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 worlds 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, Sinopecs urea output slumped 30% to 1.22mn tonnes. Sinopec, however, reported a drop in urea production by 30%, to 1.22mn tonnes. The companys 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 strong 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, Chinas score is 79.1 points, up 0.5 point since the previous quarter owing to an improvement in country risk scores. With South Koreas 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 Chinas petrochemicals market
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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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SWOT Analysis
China Petrochemicals Industry SWOT
Strengths
Worlds largest producer of synthetic fibres and fourth largest producer of synthetic rubber. Fifth largest producer of ethylene. Strong domestic demand, led by rapid growth in personal consumption and consistently high rates of fixed investment, has ensured rapid growth in the sector. Vast Chinese textile sector will remain a major consumer of petrochemicals. New technology is being introduced mainly through joint venture mega-projects. Petrochemicals sector is an area of strategic importance in 2006-2010 Five-Year Plan. Better project approval processes, particularly for those including new refining capacity.
Weaknesses
Many small-scale Chinese petrochemicals firms are burdened by low levels of productive efficiency and poor economies of scale. Chinese firms lack investment in research and development (R&D) and primarily rely on imported technology. Profit margins remain slim for some producers due to inefficient production systems as well as a lack of reliable, easy-to-source feedstock. High crude prices and Chinas high energy import requirements mean that the petrochemicals sector is having to compete with other industrial areas for access to refined products and is seeing downward pressure on margins. Refiners suffering heavy losses, raising questions about ability to fund new capacity.
Opportunities
Industrial reform has led to consolidation within the sector and greater willingness to enter into JVs with foreign firms. China badly needs foreign petrochemicals technology and is actively encouraging foreign company JV projects with state-owned enterprises; in return China offers foreign companies a growing domestic market for their products and low construction and labour costs for building greenfield projects. WTO accession puts pressure on China to open markets and encourage greater participation in petrochemicals. This is likely to bring more expertise to the market.
Threats
Refinery capacity needs to be increased and feedstock distribution and transport system improved. Increases in oil prices are affecting stability in the domestic refining sector and further pressuring petrochemicals producers margins. The petrochemicals sector could find itself having to compete with other industry sectors for feedstock and if prices are high, it could see margins further eroded. If China accedes to US and Japanese pressure for a realignment of the yuan, the cost of imported feedstock could rise, putting at risk future plant development.
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China Political SWOT
Strengths
The Communist Party of China, which has governed for the past 60 years, remains secure in its position as the sole political party in China. China's expanding economy is gradually giving it greater clout in international affairs, which will allow it to build politically important ties, especially with the developing world.
Weaknesses
As with any other one-party state, China's political system is inherently unstable and unable to respond to the wider changes taking place in society. Provincial governments often fail to enforce central government directives. Although bilateral ties have warmed since the election of Ma Ying-jeou as Taiwanese president in March 2008, China's relationship with Taiwan remains problematic, with Beijing refusing to rule out the threat of force in the event of a declaration of independence by Taiwan.
Opportunities
China is actively expanding its political and economic ties with major emerging markets such as Latin America, Africa and the Middle East. A new generation of leaders (the so-called 'fifth generation') is being prepared to take power in 2012-2013. This should ensure the continuation of reform and modernisation.
Threats
Growing corruption, widening inequalities, increasing rural poverty and environmental degradation have led to an increase in social unrest in recent years. The Communist Party is facing increasing factional rifts based on ideology and regionalism. While greater political debate would be welcomed by many, internal regime schisms could prove politically destabilising. China faces major challenges in ensuring that separatism in ethnically distinct regions such as Tibet and Xinjiang is kept at bay.
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China Economic SWOT
Strengths
China is the fastest growing major economy in the world, and this has lifted hundreds of millions of people out of poverty over the past generation. China has a massive trade surplus and its huge foreign exchange reserves serve as a major cushion against external shocks. China's economic policymakers are committed to continuing their gradual reform of the economy.
Weaknesses
China's economic growth boom has led to major imbalances and environmental degradation. The country's dependency on exports to boost growth has made it vulnerable to the global recession. Private consumption remains weak at less than 40% of GDP. The close relations between provincial leaders and local businesses are fostering corruption, making it harder for the central government to enforce its policies.
Opportunities
China's economic growth is slowly becoming more broad-based, with domestic consumption likely to rise in importance vis--vis exports, thanks to a middle class of 200-300mn people. China's ongoing urbanisation will be a major driver of growth and new cities will emerge in less developed inland provinces. The UN forecasts China's urban population rising from 40% in 2005 to 73% in 2050: a gain of 500mn people. As China moves up the value chain, it will develop its own global brand name companies, fostering innovation and growth.
Threats
We believe that the global recession of 2008-2010 will mean an end to China's double-digit annual growth rate. Despite a halt to the appreciation of the yuan, the recession is leading to job losses in China's export sector and thus increasing social instability. An over-reliance on construction activity in economic growth could become a threat if credit flows are reduced and property prices begin to cool.
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China Business Environment SWOT
Strengths
China is continuing to open up various sectors of its economy to foreign investment. With its vast supply of cheap labour, the country remains the top destination for foreign direct investment in the developing world.
Weaknesses
Foreign companies continue to complain about the poor protection of intellectual property in China. Chinese corporate governance is weak and non-transparent by Western standards. There is a considerable risk for foreign companies in choosing the right local partner.
Opportunities
China's ongoing urbanisation and infrastructure drive will provide major opportunities for foreign investment in landlocked provinces as well as the transfer of skills and know-how. The Chinese government is giving more protection and encouragement to the private sector, which is now the most dynamic in the economy and accounts for most of the country's job growth.
Threats
China's government will block attempts by foreign firms to take over assets of national importance. China is experiencing rising labour costs, prompting some investors to turn to cheaper destinations such as Vietnam.
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Global Overview
Petrochemicals Market Overview
Table: World Ethylene Production By Country, 2010 And 2015 (000 tonnes capacity)
Country US China Saudi Arabia South Korea Japan Germany Iran Canada Thailand Taiwan Netherlands India Brazil France Russia United Kingdom Singapore Qatar Belgium UAE Malaysia Kuwait Spain Mexico Argentina Poland South Africa Hungary
2010 26,390 16,260 12,670 7,480 7,350 5,745 5,376 5,052 4,425 4,045 3,980 3,885 3,440 3,135 3,280 2,840 2,790 2,600 2,540 2,000 1,740 1,700 1,645 1,580 700 700 650 620
2015f 25,500 25,700 16,520 7,580 6,000 5,505 11,076 5,202 4,425 6,145 3,980 9,405 3,700 3,135 5,220 2,840 3,790 4,200 2,540 3,500 1,740 1,700 1,645 2,580 700 700 650 620
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Table: World Ethylene Production By Country, 2010 And 2015 (000 tonnes capacity)
Country Indonesia Venezuela Ukraine Czech Republic Turkey Australia Bulgaria Israel Azerbaijan Egypt Nigeria Central Asia Slovakia Romania Algeria Colombia Chile
2010 620 600 550 545 520 515 450 450 370 300 300 240 210 200 130 120 60
2015f 620 1,900 550 595 520 515 450 450 370 300 300 1,490 210 200 1,230 120 60
e/f = estimate/forecast. Source: BMI
BMI forecasts 6% growth in international petrochemicals shipments in 2011 as the industry moves from recovery to expansion, having returned to pre-crises levels by end-2010. Global industry shipments rose 9% in 2010 in a stronger than expected recovery, although growth was largely concentrated in the Middle East and Asia with plants in mature markets witnessing low levels of capacity utilisation as well as closures. BMI estimates global olefins demand of 121mn tonnes in 2010 and forecasts 128mn tonnes in 2011.
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Emerging markets in the Middle East, Eastern Europe, Asia and South America, most notably the BRIC countries, will drive growth, with petrochemicals growth in these markets estimated at 12% in 2010 and set to continue at 8% in 2011 and 2012. Meanwhile, developed countries are unlikely to see growth in petrochemicals sales of more than 3% over the next two years and domestic industries, which are overwhelmingly fed by naphtha, will struggle to compete with the ethane-fed capacities in the Middle East. The exception is the US, which
Source: BMI
China 10% South America 4% AsiaPacific (excl. China) 23%
Ethylene Capacities By Region 2009 Estimate

Western Europe 15% Eastern Europe 5% Middle East and Africa 17% NAFTA 26%
benefits from access to cheap domestic gas feedstock. By 2010, the crude oil-to-natural gas price ratio reached 20:1 with gas priced at US$4/mn btu and oil at US$80/bbl, well above the historical average of 8:1. As a result, naphtha-reliant PE producers in Asia and Europe have felt the downturn much more than ethane-based production in the Middle East and North America.
Emerging Asian economies are set to witness a slowdown from the rate of growth reported in 2010 as a result of a withdrawal of fiscal and monetary stimuli. This will represent a major challenge to petrochemicals production. According to the Asian Development Bank, average GDP growth in emerging Asia is likely to be 7.3% in 2011, down from 8.6-8.8% in 2010. However, ASEAN is likely to see a decline in growth from 7.5% to 5.4%, forecasts ADB, which will impact negatively on the performance of petrochemicals industries in Malaysia, Indonesia and the Philippines. For the whole of emerging Asia, BMI forecasts petrochemicals output growth of 10%, down from 15% in 2010 with South Korea, Singapore and Taiwan likely to see the strongest growth rates of growth, supported by capacity expansion. While growth is set to slow, the industry in Asia was already back to pre-crisis levels by mid2010 with output now rising on the back of capacity expansion.
The robust recovery was positive for margins and profits, a trend that should continue in 2011. However, segments that rely on construction, particularly PVC, will see more tepid growth than those reliant on the automotive sector, which is helping drive growth in engineering plastics. Positive trends should also continue in specialty plastics and polyester fibres.
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There will also be a geographical concentration in petrochemicals capacities, with a continuing shift away from developed markets. Over the 201015 period, global ethylene capacity should rise by 25% to 176mn tpa. By 2015, Western Europe and North America will see their share of global capacity fall to 11% and 19% respectively from 14% and 23% in 2010. Over the period, Eastern Europe including the CIS and Turkey will increase its share by one percentage point to 6% while Asia, excluding China, will remain at a 23% share. The thrust of growth will come from Middle East and China, with capacity growing 52% and 58% respective to 39.9mn tpa and 25.7mn tpa respectively. What will be lacking in emerging markets is downstream diversification, which limits the value added to the industry.
Source: BMI
China 12% South America 5% NAFTA 19% Middle East and Africa 23% AsiaPacific (excl. China) 25% Western Europe Eastern 11% Europe 5%
Ethylene Capacities By Region 2014 Forecast
In the Middle East, there is a great emphasis on basic petrochemicals with little specialisation or innovation. Companies such as Sabic are attempting to address this over coming years, with most new investment likely to be focused on stepping up technological capacities and diversification. The Gulf regions petrochemicals industry will attract around US$50bn in investment in 2010-2015, a significant proportion of which will go towards diversification away from commodity chemicals.
European petrochemicals demand performed above expectations in H110, but moderated in H210 in the wake of the sovereigns debt crisis. Margins were also under pressure among higher cost European producers owing to increased capacity in Asia and the Middle East. However, they remain optimistic over the long term, with LyondellBasell forecasting cracker operating rates rising from a low of 80% in 2009 to 90% in 2014, while polymer operating rates are set to rise from 79% to 86-88% over the same period. The key to reviving margins in Europe will be feedstock flexibility and cost negotiation. But in the long term, consolidation and the shutdown of plants with low capacity and isolated from downstream and upstream facilities.
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Financial Results
Table: Financial Results Of Major Petrochemicals Companies, 2009
Revenues BASF (Germany) Chevron Phillips (US) Dow Chemical (US) DuPont (US) ExxonMobil (US)
1
Revenue change 2008-2009, % -18.6 -32.0 -21.8 -14.4 na -10.0 -39.2 -13.5 -39.3 -31.6 -14.2 -9.4
2
Net income EUR1.41bn US$615mn US$648mn US$1.8bn US$2.3bn TWD27.5bn -US$2.9bn JPY12.8bn US$3.1bn SAR9.1bn CNY1.56bn JPY14.7bn
Net income growth, 2008-2009, % -51.6 +122.8 +11.9 -12.9 -21.7 +39.7 na na
2 3
Net profit margin, % 4.4 7.1 2.2 6.9 na 16.8 -9.4 0.5 1.2 8.8 3.0 0.9
EUR50.7bn US$8.7bn US$44.9bn US$26.1bn na TWD180.1bn US$30.8bn JPY2.52trn US$250.4bn SAR103.1bn CNY51.7bn JPY1.62trn
Formosa Plastics (Taiwan) LyondellBasell (US) Mitsubishi Chemical (Japan) Royal Dutch Shell 4 (Netherlands/UK) Sabic (Saudi Arabia) Sinopec (China) Sumitomo Chemical (Japan)
1
+5,166.7 -58.6 na na
3 5 6
na = not available; Chemicals division revenue and earnings; From a net loss of US$7.3b; From a net 4 5 loss of JPYJPY67.2bn; Downstream revenue and earnings, including refined oil and inter-segment sales; 6 From a loss of CNY6.25bn; From a loss of JPY59.2b. Source: Company financial reports, FT, BMI
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Global Oil Products Price Outlook

Blood On The Forecourts Once again, severe winter weather conditions have been a mixed blessing for the oil markets. Sentiment benefited, as did the price of heating oil, as businesses and consumers struggled to ensure supply. On the flip side, however, there were major disruptions to fuel movements and demand. Overall oil consumption during the winter months is unlikely to have benefited significantly from the unusually low temperatures and the positive pricing effect will prove temporary. However, the strength of underlying crude prices means that all refined products are priced at uncomfortable levels, which poses a threat to consumption.
Table: Oil Product Price Assumptions, Q410-Q411 (US$/bbl)
Gasoline Rotterdam Premium Unleaded NY Harbour Unleaded Singapore Premium Unleaded Global average Jet/kerosene Rotterdam NY Harbour Singapore Global average Gasoil Rotterdam Mediterranean Singapore Global average Naphtha Rotterdam Mediterranean Singapore Global average
Q410 94.61 94.65 95 94.75
Q111e 97.89 96.79 98.75 97.81
Q211f 89.69 87.63 87.95 88.42
Q311f 86.06 84.47 84.25 84.93
Q411f 94.14 94.18 94.53 94.28
99.72 99.97 98.57 99.42
97.68 99.16 96.46 97.76
91.35 90.89 90.35 90.87
90.2 90.38 88.61 89.73
99.23 99.47 98.08 98.93
97.45 97.46 97.33 97.41
95.04 95.19 96.27 95.5
89.56 89.77 89.94 89.76
88.45 88.42 88.13 88.33
96.97 96.98 96.85 96.93
87.6 87.71 88.02 87.78
87.86 87.38 88.42 87.89
76.86 76.7 78.08 77.21
74.07 73.68 73.67 73.8
87.16 87.27 87.58 87.34
e/f = estimate/forecast. Source: BMI
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In December 2010 International Energy Agency (IEA) region enduser prices rose by 3.6% in US dollar terms (excluding tax), with gasoline up 3.5% and diesel prices 2.9% higher. Heating oil and lowsulphur fuel oil increased by 4.6% and 3.5%, respectively. Compared with December 2009 average price levels in surveyed IEAmember countries saw a 15.9% yearonyear (y-o-y) increase. The big price gains were automotive diesel (20.3%) and heating oil (19.5%). Canada saw gasoline prices rise by a steep 25.8% yoy, while the British heating oil price increased by 33.9%.
It is becoming evident that consumers are reducing fuel purchases as a reaction to record pump prices. The return of cold weather will no doubt maintain support for heating oil, but automotive diesel and gasoline sales will continue to struggle. As in the summer of 2008, prices have reached a level where socalled 'demand destruction' becomes a major factor. It can be seen that the US and European markets were changed permanently by the last period of record pump prices. Should we have a prolonged period of pump price strength, there will be blood on the forecourts as consumers reduce journey times and the move towards more efficient vehicles accelerates.
In Britain and indeed in Europe motor vehicle fuel economy is improving by 34% a year, with an obvious knock-on effect in terms of gasoline and diesel use. With the US planning higher standards for car fuel efficiency, gasoline producers in developed markets will continue to have a hard time, with most new growth in fuels demand coming from the nonOECD world. Even here, however, reductions in fuel subsidies and price liberalisation could mean that higher pump prices have a
Uncomfortable Levels Oil Product Price Data And Forecasts, 2008-2014 (US$/bbl)
e/f = estimate/forecast. Source: International Energy Agency, BMI forecasts
negative impact on demand trends at a critical time for the oil market.
US gasoline consumption in 2010 was a disappointment, and there is no reason to expect anything better in 2011. Even the Energy Information Administration (EIA) sees a likely increase in US fuels consumption of no more than 160,000b/d (0.8%), followed by 170,000b/d growth in 2012. Consumption
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continues to be dominated by gasoline, where price sensitivity is at its greatest. In 2008 US gasoline demand fell 2.6% y-o-y thanks to the higher cost of the fuel during the summer months. It will take very little to trigger a similar outcome in 2011. Given that throughout the OECD it was much the same story in 2008, demand projections for 2011 look particularly vulnerable in a high-price environment.
At present the EIA forecasts an increase in regulargrade gasoline retail prices from US$2.78 per gallon in 2010 to US$3.17 in 2011 (+14%). Onhighway diesel fuel retail prices, which averaged US$2.99/gallon in 2010, are predicted to be US$3.40 in 2011. Not only is the crude price effect reflected in these price projections, but the US body expects wider gasoline and distillate refining margins to contribute to higher retail prices. The EIA warns that there is an 8-10% risk of summer 2011 gasoline pump prices exceeding US$4.00/gallon.
Revised Forecasts In Q410 BMI estimates that the global wholesale price for premium unleaded gasoline was US$94.75/bbl. This compares with US$83.16 in Q310. Gasoline prices in Q410 were up 16.4% from US$81.41 in Q409. For the whole of 2010 the BMI calculation for gasoline is an average US$88.36/bbl. The overall y-o-y rise in 2010 gasoline prices is put at 25.9%.
For Q111 we assume a global unleaded price of US$97.81/bbl, up 3.2% from Q410 and a y-o-y rise of 11.6%. The full year 2011 wholesale gasoline price forecast is US$91.36/bbl, up 3.4% y-o-y.
In Q410 gasoil averaged US$97.41/bbl, based on a BMI-calculated composite global price. This was a yo-y rise of 19.8%. For 2010 as a whole BMI calculations suggest an average price of US$89.32/bbl, peaking in December 2010 at more than US$101/bbl. The full-year outturn is a 29.5% y-o-y increase. It can be seen that gasoil outperformed gasoline in price terms, as economic recovery stimulated demand.
For Q111 we assume a global gasoil price of US$95.50/bbl, representing a downturn from the Q410 level as weather factors subside, but a y-o-y rise of 13.5%. The full year 2011 wholesale gasoil price forecast is US$92.63/bbl, up 3.7% y-o-y.
Jet prices averaged an estimated US$99.42/bbl in Q410, using the composite for New York, Singapore and Rotterdam. The y-o-y increase was just over 19%, with jet almost matching the gain in gasoil prices. Quarter-on-quarter (q-o-q) the increase was 13.2%. For 2010 as a whole the level is believed to have been US$91.00/bbl. This compares with US$70.66/bbl in 2009 (+28.8%).
For Q111 we assume a global wholesale jet price of US$97.76/bbl, again representing a slight downturn from the Q4 level, but a y-o-y rise of 13.2%. The full year 2011 wholesale jet price forecast is US$94.32/bbl, or a y-o-y increase of 3.6%.
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Table: Oil Product Price Data And Forecasts, 2008-2015 (US$/bbl)
Gasoline Rotterdam Premium Unleaded NY Harbour Unleaded Singapore Premium Unleaded Global average Jet/kerosene Rotterdam NY Harbour Singapore Global average Gasoil Rotterdam Mediterranean Singapore Global average Naphtha Rotterdam Mediterranean Singapore Global average
2008 100.12 102.54 102.64 101.77
2009 70.6 69.7 70.21 70.17
2010e 88.96 87.77 88.36 88.36
2011f 91.94 90.77 91.37 91.36
2012f 97.69 96.44 97.08 97.07
2013f 103.44 102.11 102.79 102.78
2014f 103.44 102.11 102.79 102.78
2015f 103.44 102.11 102.79 102.78
126.61 127.13 121.11 124.95
70.81 71.18 69.99 70.66
91.22 91.69 90.1 91
94.61 94.98 93.37 94.32
100.53 100.91 99.21 100.22
106.44 106.85 105.05 106.11
106.44 106.85 105.05 106.11
106.44 106.85 105.05 106.11
122.62 121.75 119.53 121.3
68.74 69.13 69.01 68.96
89.23 89.28 89.46 89.32
92.5 92.59 92.8 92.63
98.29 98.38 98.6 98.42
104.07 104.17 104.4 104.21
104.07 104.17 104.4 104.21
104.07 104.17 104.4 104.21
87.31 86.2 88.7 87.4
58.76 58.38 60.75 59.3
78.71 78.43 79.23 78.79
81.49 81.26 81.94 81.56
86.58 86.34 87.06 86.66
91.67 91.42 92.18 91.76
91.67 91.42 92.18 91.76
91.67 91.42 92.18 91.76
e/f = estimate/forecast. Source: 2000-2006 data: Energy Information Administration; 2007-2010 data: International Energy Agency; forecasts: BMI
In Q410 naphtha averaged US$87.78/bbl on an estimated global basis, compared with US$72.27/bbl in Q310 and US$73.44 in Q409. We put the 2010 average naphtha price at US$78.79/bbl, up almost 33% yo-y. Thanks to the growth of petrochemicals demand in Asia, naphtha was once again the star performer in 2010, having also beaten the other key products in 2009.
For Q111 we assume a global wholesale naphtha price of US$87.89/bbl, virtually unchanged from Q410, but a y-o-y rise of 12.2%. The full year 2011 wholesale naphtha price forecast is US$81.56/bbl, up 3.5% y-o-y.
Looking further ahead, we see gasoline prices rising to US$97.07/bbl in 2012, and stabilising around US$102.78/bbl from 2013. Gasoil is expected to climb to US$98.42 in 2012, reaching a plateau of just
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over US$104 from 2013. The price of jet is forecast to average US$100.22/bbl in 2012 before levelling out at just over US$106from 2013. For naphtha the 2012 estimate is US$86.66, rising to a plateau of almost US$91.80 from 2013.
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Emerging Asia Petrochemicals Overview

The targets of investment in the global petrochemicals industry are the Middle East and Asia, but China is likely to take the lion's share of growth in capacity over the next five years with 3.1mn tpa currently under construction through JVs involving BP, ExxonMobil, BASF and Shell. Japan, Korea and Taiwan are important players on the mainland Chinese market, with a growing proportion of their exports sold to markets in eastern and southern China. China is planning further expansion under its 11th five-year plan, which started in April 2006. The size of the Chinese market and its rapid growth in demand for petrochemicals is pushing up Asian ethylene feedstock prices and causing supply problems throughout the region. To address the problem, Chinese ethylene production is scheduled to reach 21.38mn tpa by 2012, with seven major ethylene projects capable of producing 6.2mn tpa of ethylene, including an increase in the total production capacity of existing ethylene plants by 4.38mn tpa. The largest projects involve leading petrochemicals majors, particularly Shell. The chief risk factor for the Chinese petrochemical sector is the rapid rise in global petrochemicals investment, which is leading to high demand for engineering contractors, particularly in the Middle East. This could create bottlenecks in the Chinese petrochemical industry, further exacerbating the problem of feedstock shortages throughout Asia and pushing up prices.
Restrictions on raw materials mean that Japan is unlikely to raise its total capacity above 7.2mn tpa. Instead, Japanese petrochemicals producers are shifting their investment to eastern Asia and the Middle East to build projects that will eventually export to China. In South Korea, where petrochemicals contribute 20-25% of GDP with ethylene capacity of 5.45mn tpa, growth is also likely to be stimulated by Chinese demand. Taiwan's ability to take advantage of Chinese growth is constrained by political disputes with the mainland, although this has not stopped some companies from investing in the mainland. Taiwan has an ethylene capacity of 2.42mn tpa.
While Shell has concentrated its investments in China, Dow Chemical is turning its attention to India, which has greater unrealised potential for expansion. Foreign companies have yet to take part in largescale Indian projects such as cracker development due to the relatively small scale of operations. The Indian government has placed petrochemicals at the heart of its development strategy with the creation of a number of petrochemicals zones. Nevertheless, despite strong levels of economic growth, expansion in the Indian petrochemical industry is proceeding at a slower rate than China. Around 70% of the Indian market is dominated by two Indian corporations: Reliance Industries Ltd (RIL) and Indian Petrochemical Corporation Ltd (IPCL). Plans are in place to construct its second integrated oil refinery in the Jamnagar Special Economic Zone, adjacent to its existing oil refinery in Gujarat. Dow Chemical is funding the zone's petrochemicals production. Meanwhile, the state-owned oil refiner Indian Oil Corporation Ltd (IOCL) is expanding into the petrochemicals sector with the construction of Haldia
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Petrochemicals and plans for further petrochemicals operations in West Bengal, Orissa and Haryana. Private industrial conglomerates such as the Tata Group are also planning to enter the petrochemical sector.
The growth in demand for feedstock from China and India is proving to be a serious problem for petrochemicals industries in smaller emerging Asian economies. The Philippines aims to move away from its petrochemical industry's dependency on imported feedstock, but progress is slow and the sector is burdened by failed projects and high levels of corporate debt as well as cheaper and more competitive imports. Planned developments, including a new naphtha cracker at Batangas, expected to be operational in 2008, will see ethylene capacity of 320,000tpa and polymer production capacity of 1.16mn tpa by 2011. However, this will not be enough to satisfy local demand and the Philippines will remain dependent on imports. Indonesia is also a significant net importer of basic petrochemicals as a result of setbacks in its new facility and expansion projects since the 1997 Asian financial crisis. Rising feedstock prices are also depressing profit margins and affecting competitiveness. A petrochemicals national strategy developed by the local industry, the government and Japanese investors, published in March 2007, envisages that over 50% of national ethylene demand will be met by imports up until 2010. The Chandra Asri Petrochemical Centre (CAPC) expanded ethylene capacity to 620,000tpa and propylene capacity to 279,000tpa in 2007 to cope with demand, but Indo Olefin Petrochemical's 800,000tpa ethylene project is unlikely to go ahead due to a lack of financial backing.
Malaysia's petrochemicals industry is growing and is supported by its well-developed oil and gas sector. According to the Third Industrial Master Plan (IMP3) (2006-2020) for the petrochemicals industry, the Malaysian government is planning to develop Bintulu (Sarawak), Gurun (Kedah), Tanjung Pelepas (Johor) and Labuan into new petrochemical zones. The government is also planning to focus on realising the full potential of the existing petrochemical zones. The plan would require total investment of around MYR34bn (US$9.32bn) for the next 15 years. The petrochemicals industry is expected to remain a key contributor to Malaysia's manufacturing sector. Chemical Market Associates (CMA) forecasts Malaysia's average annual growth rate for PE and PP in 2004-2009 to be 7.0% and 6.5% respectively.
While the Philippines and Indonesia are struggling in an increasingly competitive environment, Thailand is pressing ahead with its plans to double petrochemicals capacity over the next five years. But new plants will have to satisfy environmental regulations to be introduced this year or the petrochemical industry's growth potential will be severely curtailed. The focus of investment is Map Ta Phut, which will contain a US$1.7bn ethane cracker producing 1mn tpa of ethylene to feed PE plants at the complex to be opened in Q409. A second cracker with a capacity of 1.7mn tpa of ethylene and propylene is also planned. Thailand's PTT Chemical is partnering with Dow Chemical, Siam Cement and Toyo Engineering to develop the complex, which will make the country a significant supplier of synthetic resins.
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Elsewhere in Indo-China, Vietnam is showing little interest in developing its petrochemicals sector. Vietnam has little capacity for domestic production of either ethylene or the basic polymers derivatives PE and PP and its main thrust of development is in fertiliser production for domestic use.
Table: Asian Ethylene Projects
Company PetroChina PetroChina PetroChina PetroChina Sinopec/BASF* Sinopec Sinopec Sinopec PetroChina Sinopec/Aramco/ExxonMobil Sinopec/KPC Shide/SABIC Sinopec Sinopec YNCC LG Daesan Lotte Daesan Formosa Petrochemicals CPC IOC ONGC OIC Haldia Petrochemicals Siam Cement SP Chemicals ExxonMobil* Royal Dutch Shell ExxonMobil

Location Lanzhou Daqing Dushanzi Fushun Nanjing Tianjin Zenhai Guangzhou Chengdu Fujian Guangdong Dalian Shanghai Wuhan Yeochun Daesan Daesan Mailiao Kaohsiung Panipat Mangalore Paradip Haldia Extra Map Ta Phut Phu Yen Singapore Singapore Singapore
Country China China China China China China China China China China China China China China South Korea South Korea South Korea Taiwan Taiwan India India India India India Vietnam Singapore Singapore Singapore
Start-up Late 2006 2007/2008 2008 2008 2009 2010 2010 2010 2010 2010 2010 2010 na na Nov 2006 2007 2008 Q1 2007 2010 2009 2010 2011 Q1 2008 2010 2012 Q4 2006 2009/2010 na
Capacity, tpa 360,000 320,000 1,000,000 860,000 150,000 1,000,000 1,000,000 1,000,000 800,000 800,000 1,000,000 1,000,000 1,000,000 800,000 350,000 210,000 350,000 1,200,000 1,200,000 800,000 1,100,000 2,950,000 140,000-168,000 800,000 1,500,000 75,000 800,000 na
* Expansion, capacity refers to addition;
At the planning stages; na = not available/applicable. Source: Reuters
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China Market Overview

Chinas petrochemicals sector has become the countrys third largest industry behind textiles and machinery, and is of great importance to the economy. The sector reported profits of CNY300bn (US$37.9bn) during the first eight months of 2006, according to the governments State Development and Reform Commission, a rise of 22.5% y-o-y. The sector processed 199.15mn tonnes of crude oil during the period, up 5.7% on the previous year.
China has several thousand petrochemicals production facilities under construction, which are likely to contribute to an increase in production capacity in the coming years. However, these include many smallscale operations as well as the more notable mega-projects described below, and some of the former may never see the light of day given current government concerns about environmental damage from certain projects located along major rivers.
Table: Chinas Petrochemicals Sector HDPE Capacity
Company
Daqing Petrochemical Co Jilin Petrochemicals Ltd (JLPL) Liaoyang Petrochemical Co (LYPC) Maoming Petrochemical Corp (MPCC) Shanghai Golden Phillips Petrochemical Co Ltd Shanghai Petrochemical Co Ltd (SPC) Shanghai Secco Petrochemical Co Ltd (Secco) Sinopec Beijing Yanshan Petrochemical Co Ltd (BYPC) Yangzi Petrochemical Co Ltd (YPC)
Region
Heilongjiang Jilin Liaoning Guangdong Shanghai Shanghai Shanghai Beijing Jiangsu
Location
Daqing Jilin Liaoyang Maoming Jinshan Jinshan Caojing Beijing Nanjing
Capacity, tpa
240,000 300,000 70,000 350,000 150,000 250,000 300,000 160,000 280,000
Source: BMI
Chinas petrochemicals industry has been successful in obtaining considerable scale, due to the rapid developments in the seventh, eighth and ninth five-year plan periods. Substantial restructuring, amendment in investment plans and technological innovations in the ninth five-year plan period (19962000) resulted in increased enterprise scale, production capacity and technological equipment. This plan formed the basis for strategic development and planning in the 10th five-year plan period (2001-2005). Furthermore, rapid economic globalisation and sector reforms in the country are expected to help the Chinese petrochemicals industry grow in the future.
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As GDP rises in the country and heads toward the US$3,000 per capita level (it is forecast to be just short of this by 2010 compared with an estimated US$1,679 in 2006), demand for plastics and chemicals is expected to grow sharply. Underpinning much of Chinese petrochemicals demand is the countrys largescale textile sector, which continues to grow and is expected to remain a major source of consumption for many products for the foreseeable future. Furthermore, demand for plastics and packaging in China is expected to account for 30% of total world consumption by 2010.
Table: Chinas Petrochemicals Sector LDPE Capacity
Company BASF-YPC Co Ltd CNOOC and Shell Petrochemicals Co Ltd (CSPCL) Daqing Petrochemical Co Daqing Petrochemical Co Maoming Petrochemical Corp (MPCC) Maoming Petrochemical Corp (MPCC) PetroChina Lanzhou Petrochemical Corp PetroChina Lanzhou Petrochemical Corp Qilu Petrochemical Co Ltd Shanghai Petrochemical Co Ltd (SPC) Sinopec Beijing Yanshan Petrochemical Co Ltd (BYPC) Sinopec Beijing Yanshan Petrochemical Co Ltd (BYPC)
Region Jiangsu Guangdong Heilongjiang Heilongjiang Guangdong Guangdong Gansu Gansu Shandong Shanghai Beijing Beijing
Location Nanjing Huizhou Daqing Daqing Maoming Maoming Lanzhou Lanzhou Zibo Jinshan Beijing Beijing
Capacity, tpa 400,000 250,000 65,000 200,000 110,000 250,000 40,000 200,000 140,000 160,000 180,000 200,000
Source: BMI
Table: Chinas Petrochemicals Sector LLDPE Capacity
Company CNOOC and Shell Petrochemicals Co Ltd (CSPCL) Daqing Petrochemical Co Dushanzi Petrochemical Fushun Petrochemical Co Guangzhou Petrochemical General Works Jilin Petrochemicals Ltd (JLPL) Maoming Petrochemical Corp (MPCC) Panjin Ethylene Corp PetroChina Lanzhou Petrochemical Corp
Region Guangdong Heilongjiang Xinjiang Liaoning Guangdong Jilin Guangdong Liaoning Gansu
Location Huizhou Daqing Dushanzi Fushun Guangzhou Jilin City Maoming Panjin Lanzhou
Capacity, tpa 200,000 85,000 200,000 85,000 260,000 275,000 220,000 130,000 60,000
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Table: Chinas Petrochemicals Sector LLDPE Capacity
Company PetroChina Lanzhou Petrochemical Corp Qilu Petrochemical Co Ltd Shanghai Secco Petrochemical Co Ltd (Secco) Tianjin United Chemical Corp (TUCC) Yangzi Petrochemical Co Ltd (YPC) Zhongyuan Petrochemical Co Ltd
Region Gansu Shandong Shanghai Tianjin Jiangsu Henan
Location Lanzhou Zibo Caojing Tianjin Nanjing Puyang
Capacity, tpa 300,000 100,000 300,000 120,000 200,000 250,000
Source: BMI
Table: Chinas Petrochemicals Sector PP Capacity
Company Anqing Co Changling Petrochemical Co CNOOC and Shell Petrochemicals Co Ltd (CSPCL) CNPC Ningxia Dayuan Refining & Chemical Co Dalian Petrochemical Corp Dalian Petrochemical Corp Daqing Petrochemical Co Daqing Refining & Chemical Dushanzi Petrochemical Formosa Plastics Industrial Co (Ningbo) Fujian Petrochemical Co Ltd (FPCL) Fushun Petrochemical Co Gansu Langang Petrochemical Co Guangzhou Petrochemical General Works Guangzhou Petrochemical General Works Hebei Gaocheng Ruixing Chemical Co Ltd Heilongjiang Qihua Chemicals Co Ltd Huabei Oilfield Refinery Jilin Petrochemicals Ltd (JLPL) Jinan Co Jinxi Petrochemical
Region Anhui Hunan Guangdong Ningxia Liaoning Liaoning Heilongjiang Heilongjiang Xinjiang Zhejiang Fujian Liaoning Gansu Guangdong Guangdong Hebei Heilongjiang Hebei Jilin Shandong Liaoning
Location Anqing Yueyang Huizhou Yinchuan Dalian Dalian Daqing Daqing Dushanzi Ningbo Quanzhou Fushun Lanzhou Guangzhou Guangzhou Gaocheng Qiqihar Renqiu Jilin City Jinan Huludao
Capacity, tpa 30,000 100,000 240,000 30000 125,000 200,000 100,000 300,000 100,000 450,000 70,000 90,000 110,000 50,000 110,000 20,000 20,000 100,000 55,000 70,000 30,000
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Table: Chinas Petrochemicals Sector PP Capacity
Company Jiujiang Co Liaoyang Petrochemical Co (LYPC) Luoyang Petrochemical General Factory Maoming Petrochemical Corp (MPCC) Maoming Petrochemical Corp (MPCC) Panjin Ethylene Corp PetroChina Lanzhou Petrochemical Corp PetroChina Lanzhou Petrochemical Corp Qilu Petrochemical Co Ltd Shandong Dongming Petrochemical Group Shanghai Petrochemical Co Ltd (SPC) Shanghai Petrochemical Co Ltd (SPC) Shanghai Secco Petrochemical Co Ltd (Secco) Shaoxing Sanyuan Petrochemical Co Shijiazhuang Refining & Chemical Co Ltd (SRCC) Sinopec Beijing Yanshan Petrochemical Co Ltd (BYPC) Sinopec Beijing Yanshan Petrochemical Co Ltd (BYPC) Sinopec Beijing Yanshan Petrochemical Co Ltd (BYPC) Sinopec Hainan Refining & Chemical Co (HRCC) Sinopec Hubei Xinghua Co Ltd Sinopec Jingmen Petrochemical Complex Sinopec Qingdao Refining and Chemical Co Ltd Tianjin United Chemical Corp - (TUCC) West Pacific Petrochemical Co (WEPEC) Wuhan Phoenix Co Ltd Xinjiang Dushanzi Tianli High & New Tech Co Ltd (DTTC) Yanchang Petroleum Group Yangzi Petrochemical Co Ltd (YPC) Zhenghe Group Zhenhai Refining and Chemical Co Ltd (ZRCC) Zhongyuan Petrochemical Co Ltd
Region Jiangxi Liaoning Henan Guangdong Guangdong Liaoning Gansu Gansu Shandong Shandong Shanghai Shanghai Shanghai Zhejiang Hebei Beijing Beijing Beijing Hainan Hubei Hubei Shandong Tianjin Liaoning Hubei Xinjiang Shaanxi Jiangsu Shandong Zhejiang Henan
Location Jiujiang Liaoyang Luoyang Maoming Maoming Panjin Lanzhou Lanzhou Zibo Heze Jinshan Jinshan Caojing Shaoxing Shijiazhuang Beijing Beijing Beijing Yangpu Jingmen Jingmen Qingdao Tianjin Dalian Wuhan Dushanzi Yanan Nanjing Guangrao Ningbo Puyang
Capacity, tpa 120,000 60,000 80,000 170,000 300,000 50,000 40,000 300,000 70,000 40,000 230,000 260,000 250,000 300,000 100,000 60,000 165,000 200,000 210,000 20,000 120,000 200,000 60,000 100,000 100,000 30,000 100,000 360,000 60,000 200,000 80,000
Source: BMI
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Table: Chinas Petrochemicals Sector Cracker Capacity
Company BASF-YPC Co Beijing Eastern Petrochemical Co, Eastern Chemical Works CNOOC and Shell Petrochemicals Co Ltd (CSPCL) Daqing Petrochemical Co Dushanzi Petrochemical Fushun Petrochemical Co Guangzhou Petrochemical General Works Jilin Petrochemicals Ltd (JLPL) Liaoyang Petrochemical Co (LYPC) Maoming Petrochemical Corp (MPCC) Maoming Petrochemical Corp (MPCC) Panjin Ethylene Corp PetroChina Lanzhou Petrochemical PetroChina Lanzhou Petrochemical Qilu Petrochemical Co Shanghai Petrochemical Co (SPC) Shanghai Petrochemical Co (SPC) Shanghai Secco Petrochemical Co (Secco) Sinopec Beijing Yanshan Petrochemical Co (BYPC) Tianjin United Chemical Corp (TUCC) Yangzi Petrochemical Co Zhongyuan Petrochemical
Region Jiangsu Beijing Guangdong Heilongjiang Xinjiang Liaoning Guangdong Jilin Liaoning Guangdong Guangdong Liaoning Gansu Gansu Shandong Shanghai Shanghai Shanghai Beijing Tianjin Jiangsu Henan
Capacity, tpa 600,000 180,000 800,000 600,000 220,000 150,000 260,000 850,000 200,000 380,000 640,000 180,000 450,000 250,000 840,000 150,000 700,000 900,000 760,000 200,000 650,000 200,000
Source: BMI
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Table: Chinas Petrochemicals Sector PVC Capacity
Company Anhui Chlor-Alkali Chemical Group Co Baoding Electrochemical Factory Baotou Tomorrow Technology Co Beiyuan Chemical Industry Co Benxi Chemical Industry Group Co Cangzhou Cangjing Chemical Co Changzhou Chemical Plant Chengdu Huarong Chemical Co Ltd (CHCCL) Chenzhou Electrochemical Chenzhou Huaxiang Chemical Industry Co China Zenith Chemical Group Dezhou Petrochemical Plant Formosa Plastics Industrial Co (Ningbo) Fujian Nanping Rongchang Chemical Co Gansu Yanguoxia Chemical Plant Guangxi Liuzhou Dongfeng Chemical Co Guizhou Zunyi Alkali Plant Haiji Chloralkali Chemical Industry Co (HCACC) Handan Fuyang Chemical Group Co Ltd Hangzhou Electrochemical Group Co (HEGC) Haohua Yuhang Chemical Industrial Co Harbin Huaer Chemical Co Hebei Baoshuo Co Hebei Cangzhou Dahua Group Co Hebei Jinniu Chemical Hebei Shenghua Chemical Industry Co Heilongjiang Qihua Chemicals Co Henan Jiyuan City Resin Plant Henan Shenma Chloride & Alkali Chemical Industry Co Hubei Yichang Shanshui Hubei Yihua Chemical Industry Co Hubei Yihua Chemical Industry Co Hunan Zhuzhou Chemical Industry Group Co Inner Mongolia Huanghe Chemical Group Co Inner Mongolia Linhai Chemical Industry Co
Region Anhui Hebei Inner Mongolia Shaanxi Liaoning Hebei Jiangsu Sichuan Hunan Hunan Heilongjiang Shandong Zhejiang Fujian Gansu Guangxi Guizhou Inner Mongolia Hebei Zhejiang Henan Heilongjiang Hebei Hebei Hebei Hebei Heilongjiang Henan Henan Hebei Hubei Hubei Hunan Inner Mongolia Inner Mongolia
Location Hefei Baoding Baotou Shenmu Benxi Cangzhou Changzhou Pengzhou Chenzhou Chenzhou Mudanjiang Dezhou Ningbo Fuwen Yanguoxia Liuzhou Zunyi Wuhai Handan Hangzhou Jiaozuo Harbin Baoding Cangzhou Cangzhou Zhangjiakou Qiqihar Jiyuan Pingdingshan Yichang Yichang Yichang Zhuzhou Wuhai Wulateqian
Capacity, tpa 20,000 110,000 30,000 100,000 15,000 300,000 130,000 80,000 50,000 50,000 60,000 60,000 400,000 15,000 10,000 10,000 60,000 60,000 15,000 60,000 180,000 25,000 100,000 60,000 230,000 50,000 100,000 45,000 200,000 20,000 100,000 120,000 100,000 30,000 150,000
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Company Inner Mongolia Sanlian Chemical Co Jiangsu GPRO Beifang Chlor-Alkali Co Jiangsu Jiangdong Chemical Co Jiangsu Meilan Chemical Co Jiangsu Yinka Chemical Co Jiangyin Huashi Jiaozuo Chemical & Power Group Co Jilantai Salt Chemical Group Co Jilin Petrochemicals Ltd (JLPL) Jinhua Chemical Corp (JHCC) Jining Zhongyin Electrochemical Co Juhua Group Corp Leshan Yongxiang Resin Nanning Chemical Industry Co Ningxia Electrochemical Plant Ningxia Jinyuyuan Chemical Group Co Ningxia West PVC Ningxia Yinglite Chemical Panjin Liaohe Group Co Qilu Petrochemical Co Qingdao Haijing Chemical (Group) Co Shaanxi Jintai Chlor-Alkali Chemical Shandong Chloralkali Resins Co Shandong Haihua Alkali & Resin Co Shandong Hengtong Chemical Industry Co Shandong Huantai Bohui Corp Shanghai Chlor-Alkali Chemical Co Ltd (SCAC) Shanghai Tianyuan Chemical Group Corp Shanghai Tianyuan Huasheng Chemical Co Shanxi Yungang Organic Chemical Group Co Shanxi Yushe Chemical Co Shenyang Chemical Co Sichuan Jinlu Resin Co Siping Haohua Chemical Co Southeast Electro-Chemical Co (SEEC)
Region Inner Mongolia Jiangsu Jiangsu Jiangsu Jiangsu Jiangsu Henan Inner Mongolia Jilin Liaoning Shandong Zhejiang Sichuan Guangxi Ningxia Ningxia Ningxia Ningxia Liaoning Shandong Shandong Shaanxi Shandong Shandong Shandong Shandong Shanghai Shanghai Shanghai Shanxi Shanxi Liaoning Sichuan Jilin Fujian
Location Hohhot Xuzhou Changzhou Taizhou Wuxi Jiangyin Jiaozuo Jilantai Jilin City Huludao Jining Quzhou Leshan Nanning Shizuishan Qingtongxia Shizuishan Shizuishan Panjin Zibo Qingdao Yulin Weifang Weifang Linyi Zibo Wujing Shanghai Caojing Datong Yushe Shenyang Deyang Siping Fuzhou
Capacity, tpa 30,000 100,000 150,000 40,000 10,000 80,000 130,000 200,000 20,000 130,000 50,000 65,000 100,000 160,000 50,000 160,000 275,000 200,000 80,000 600,000 160,000 100,000 100,000 100,000 120,000 200,000 410,000 10,000 20,000 10,000 400,000 130,000 340,000 80,000 100,000
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Company Suzhou Huasu Plastics Co (SHP) Taiyuan Chemical Industry Group Co Tangshan Sanyou Chemical Industries Co Tianjin Chemical Plant of Tianjin Bohai Chemical Industrial Tianjin Dagu Chemicals Tianjin Dagu Chemicals Tianjin LG-Dagu Chemical Co Tosoh Guangzhou Chemical Industries Co (TGC) Weifang Yaxing Chemical Co Wuhan Gedian Chemical Industry Group Co Wuhu Chemical Plant Wuxi Greenapple Chemical Industry Co Xian Chemical Plant Xiaoshan Lianfa Electrochemistry Co Xinjiang Shihezi Zhongfa Chemical Co Xinjiang Tianye Co Xinjiang Zhongtai Chemical Industry Co Xinjiang Zhongtai Chemical Industry Co Xinwen Mining Co Xinxiang Resin Plant Xinyi Electrochemical Plant Xuzhou Tiancheng Chlor-Alkali Co Yangquan Coal Industry Group Yibin Tianyuan Co Yunnan Chemical Plant Yunnan Salt Chemical Co Zhengzhou Chemical Plant
Region Jiangsu Shanxi Hebei Tianjin Tianjin Tianjin Tianjin Guangdong Shandong Hubei Anhui Jiangsu Shaanxi Zhejiang Xinjiang Xinjiang Xinjiang Xinjiang Shandong Henan Jiangsu Jiangsu Shanxi Sichuan Yunnan Yunnan Henan
Location Suzhou Taiyuan Tangshan Tianjin Tianjin Tianjin Tianjin Guangzhou Weifang Wuhan Wuhu Wuxi Xian Hangzhou Shihezi Shihezi Urumqi Urumqi Taian Xinxiang Xinyi Peixian Yangquan Yibin Kunming Kunming Zhengzhou
Capacity, tpa 130,000 150,000 300,000 120,000 200,000 280,000 340,000 220,000 40,000 60,000 20,000 100,000 50,000 20,000 50,000 320,000 160,000 140,000 100,000 15,000 50,000 100,000 100,000 500,000 25,000 130,000 12,000
Source: BMI
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Table: Chinas Petrochemicals Sector PS Capacity
Company Daqing Petrochemical Co Formosa Plastics Industrial Co (Ningbo) Fujian Fangxing Petrochemical Co Guangzhou Petrochemical General Works Panjin Ethylene Corp Qilu Petrochemical Co Quanzhou QuanGang Ocean Polystyrene Resin Co SAL Petrochemical (Zhangjiagang) Co Shanghai Secco Petrochemical Co (Secco) Sinopec Beijing Yanshan Petrochemical Co Ltd (BYPC) SK Networks Zhanjiang Xinzhongmei Chemical Co Zhenjiang Chi Mei Chemical Co
Region Heilongjiang Zhejiang Fujian Guangdong Liaoning Shandong Fujian Jiangsu Shanghai Beijing Guangdong Guangdong Jiangsu
Location Daqing Ningbo
Capacity, tpa 25,000 200,000 120,000
Guangzhou Panjin Zibo Quanzhou Zhangjiagang Caojing Beijing Shantou Zhanjiang Zhenjiang
50,000 30,000 35,000 120,000 120,000 300,000 50,000 150,000 100,000 360,000
Source: BMI, ICIS
Energy Inefficiencies And Bottlenecks

Although Chinas petrochemicals industry is growing rapidly, it faces several challenges. Economic growth since the reforms of the 1980s has resulted in imbalances in the petrochemicals sectors industrial structure, particularly relating to energy and raw materials supply. This could potentially lead to a reduced incentive to increase production in an economy that is already unable to meet its domestic demand from the local market. In an effort to stabilise production and advance the industrys competitiveness at a global level, the government has introduced measures to optimise the industrial structure of the petrochemicals sector. These measures are primarily aimed at improving the production of agricultural petrochemicals and the diversification of products to reduce dependency on exports. The government is also promoting investment in advanced technologies in eastern areas.
The China Petroleum and Chemical Industry Planning Institute has proposed four guidelines for the development of the countrys petrochemicals industry during the 11th five-year plan (2006-2010):
The optimisation of crude supply and refining capacity with an improvement in distribution processes
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Better crude and petroleum product storage and transport facilities, including improved import handling and distribution systems, more terminal and strategic supply bases, better pipeline infrastructure and lower transport costs
The introduction of measures and technology to make production more energy efficient and thus increase competitiveness
Increased production of resins, fibres and rubber.
Efforts are being made to ensure the optimum use of rich energy resources in the western region. According to CPCIA estimates, energy consumption in the petrochemicals sector accounts for about 40% of total domestic consumption. The sectors energy consumption per unit produced is 4.1 times higher than in the US and Canada. The association has also proposed increased government investment in technical research to promote technology enhancement and reduce the cost of petrochemicals production.
The geographic distribution of the countrys oil refineries is also a factor that could undermine future growth and there are plans to build new refining capacity close to, or as part of, integrated petrochemicals complexes to provide reliable captive feedstock and reduce transport costs. Government agencies are also increasingly insisting on sufficient feedstock being incorporated into proposed projects for new petrochemicals production capacity. Plans for several industrial free trade zones around the country also include petrochemicals operations.
The industry is initiating efforts to promote safer and more environmentally friendly practices in the manufacturing, distribution and use of its products. In January 2006, the CPCIAs Responsible Care system, promoting health, safety and the environment, came into effect. This is a joint effort with the Association of International Chemical Manufacturers. According to CPCIA data, 60 people died in accidents in petroleum and petrochemicals operations in 2005, an increase of 29% y-o-y.
Production
China is the worlds leading synthetic fibres producer, ranking fourth in terms of synthetic rubber and fifth in both resins and ethylene production capacity. However, individual production facilities are scattered and output is considerably below the average for world-scale plants, resulting in higher unit production costs. One study conducted by the government estimated that consumption per unit of output for small plants was more than 76% higher than large plants. Estimates for average energy intensities for Chinas ethylene plants range from 73 to 90 gigajoules per tonne (GJ/t), based on a relatively heavy feedstock mix. This compares with about 68GJ/t for US steam cracking plants and 58GJ/t primary energy (including feedstock) in the Netherlands.
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Alongside addressing production efficiencies, the structural reform of Chinas state-owned enterprises (SOEs) continues. Both the scale of the reform programme and the pace at which it is being implemented are unprecedented. Overall, changes have involved more than 200,000 SOEs, employing over 100mn workers, generating half the countrys industrial output and accounting for two-thirds of fixed assets.
An indication of the pace and depth of the reform programme within the petroleum and petrochemicals sector since the early 1990s may be found in the changes in the three key companies. These are China National Petroleum Corporation (CNPC) and its subsidiary PetroChina, China Petrochemicals Corporation (Sinopec Group) and China National Offshore Oil Corporation (CNOOC).
Table: Chinas Supply And Demand Volumes Of Major Petrochemical Products
Olefins Ethylene Propylene Polyolefins Polyethylene (PE) Polypropylene (PP) Aromatics Petro benzene Polyesters Purified terephthalic acid (PTA) Monoethylene glycol (MEG) Methanol
Production growth rate, 2007-2008, % -2 1
Production CAGR, 20032007, % 14 11
Apparent demand, 2008, 000tpa 10,963 10,270
Demand growth rate, 2007-2008, % 0 3
Demand CAGR, 20032007, % 16 13
-3 2
15 14
11,325 10,465
-2 -2
7 10
-3
15
3,936
-2
18
-8 0 3
26 18 35
14,997 7,001 12,329
-11 6 10
19 18 25
CAGR = compound annual growth rate. Source: ICIS, CBI Research and Consulting; China National Bureau of Statistics
The Sinopec Group was reorganised with the companys best assets combined to form China Petroleum and Chemical Corporation (Sinopec Corporation), which floated a stake in the public markets. Sinopecs businesses include oil and gas exploration and production, crude oil processing, oil products trading, transport, distribution and marketing, and petrochemicals products production, marketing and distribution. The governments restructuring of the Chinese chemical industry redistributed some of the countrys ethylene operations along geographical lines between Sinopec and PetroChina. Although the Chinese petrochemicals market has numerous opportunities due to strong economic growth, it is confronted with many challenges including strong competition, resource constraints and restrictive environmental regulations.
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Against this backdrop, the Chinese petrochemicals sector is likely to:
Judicially exploit available resources
Encourage more foreign and private investment
Encourage restructuring of the industry to achieve economies of scale
Strive for technology innovation, with a focus on core technologies and expertise with intellectual property
Establish strong links with Middle East oil producers offering investment in petrochemicals projects in return for crude/refined product supplies.
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Table: Cracker Capacity, 2006-2013 (000tpa)
2006e CNOOC PetroChina Daging PetroChina Fushun PetroChina Jilin PetroChina Lanzhou PetroChina Liaoyang Sinopec Beijing (Yanshan) Sinopec Guangzhou Sinopec Maoming Sinopec Nanjing (Yangzi) Sinopec Puyang Sinopec Qilu Sinopec Shanghai Sinopec Zhenhai Sinopec Tianjin Secco Petrochemical (BP/Sinopec) Exxon/Aramco Fujian CNOOC/Shell Huizhou CNPC Fushun BASF/YPC Nanjing Chengdu Ethylene Sinopec Wuhan Sinopec/KPC Others Total 140 800 145 530 880 130 710 200 1,000 850 180 720 845 na 200 900 na 800 na 600 na na na 600 10,230
2007 140 800 145 530 880 130 860* 200 1,000 850 180 720 845 na 200 900 na 800 na 600 na na na 450 10,230
2008 140 800 145 530 880 130 860* 200 1,000 850 180 720 845 na 1,000 900 800 800 850
2009 140 800 145 530 880 130 860* 200 1,000 850 180 720 845 1,000 1,000 1,100 800 800 850
2010f 140 800 145 530 880 130 860* 200 1,000 850 180 720 845 1,000 1,000 1,100 800 800 850
2011f 140 800 145 530 880 130 860* 200 1,000 850 180 720 845 1,000 1,000 1,100 800 800 850
2012f 140 800 145 530 880 130 860* 200 1,000 850 180 720 845 1,000 1,000 1,100 800 800 850
2013f 140 800 145 530 880 130 860* 200 1,000 850 180 720 845 1,000 1,000 1,100 800 800 850
600 na na na 450 12,680
600 na na na 450 13,680
600 na na na 450 13,680
600 na na 1,000 450 14,680
600 800 800 1,000 450 16,280
600 800 800 1,000 450 16,280
e = forecast; * Assumes Yanshan purchase of Dongfang approved; na = not available/applicable; Estimate/forecast; start date not confirmed; Assumes CNPC start-up on schedule otherwise total = 11,830. Source: World Cracker Report, companies, BMI
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Industry Trends And Developments

Major planned investments between 2009 and 2014 will see ethylene and polymer production capacity increase dramatically. Some of the largest investments are in the south eastern and eastern provinces of Guangdong, Fujian, Zhejiang and Jiangsu as well as the Shanghai municipality. Xinjiang in the north west is also a major investment destination for the industry, due to its proximity to Central Asian oil and gas fields.
Table: Chinas Petrochemicals Sector Ethylene Projects
Company Shanghai Secco Petrochemical Co (Secco) Fujian Refining & Petrochemical Co (FREP) Liaoning Huajin Tongda Chemical Tianjin Petrochemical/Sabic Zhenhai Refining and Chemical Co (ZRCC) Baotou Shenhua Coal Chemicals Dushanzi Petrochemical BASF-YPC Co Dalian Shide Group Daqing Petrochemical Fushun Petrochemical Dow Chemical/Shenhua PetroChina Sichuan Petrochemical(PSP) Shanghai Petrochemical Co (SPC) Sinopec Hainan Refining & Chemical Co (HRCC) Sinopec/SK Corp Shenyang Paraffin Wax Chemical Co Ltd Sinopec Beijing Yanshan Petrochemical Co (BYPC) Sinopec Corp
Province Shanghai Fujian Liaoning Tianjin Zhejiang Inner Mongolia Xinjiang Jiangsu Liaoning Heilongjiang Liaoning Shaanxi Sichuan Shanghai Hainan Hubei Liaoning Beijing Sichuan
Location na Quanzhou Panjin Tianjin Ningbo Baotou Dushanzi Nanjing Dalian Daqing Fushun Yulin Pengzhou Jinshan na Wuhan Shenyang Beijing na
Capacity, tpa 200,000* 800,000 450,000 1,000,000 1,000,000 300,000 1,000,000 750,000* 1,300,000 600,000 800,000 500,000 800,000 600,000 1,000,000 800,000 135,000 1,300,000* 340,000
Completion 2009 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2012 2012 2012 2012 2012 na na na
* Expansion; na = not available/applicable. Source: BMI, Company sources
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Table: Chinas Petrochemicals Sector PE Projects
Product HDPE LLDPE LLDPE LDPE LLDPE LLDPE LLDPE LLDPE LLDPE LLDPE HDPE HDPE LLDPE LLDPE HDPE LLDPE
Company Liaoning Huajin Tongda Chemical Co Fujian Refining & Petrochemical Co (FREP) Shenyang Paraffin Wax Chemical Co Dushanzi Petrochemical Baotou Shenhua Coal Chemicals Dushanzi Petrochemical Zhenhai Refining and Chemical Co (ZRCC) Daqing Petrochemical Co Tianjin Petrochemical/Sabic Tianjin Petrochemical/Sabic Fushun Petrochemical Co PetroChina Sichuan Petrochemical Co (PSP) Fushun Petrochemical Co PetroChina Sichuan Petrochemical Co (PSP) Dalian Shide Group Dalian Shide Group
Region Liaoning Fujian Liaoning Xinjiang Inner Mongolia Xinjiang Zhejiang Heilongjiang Tianjin Tianjin Liaoning Sichuan Liaoning Sichuan Liaoning Liaoning
Location Panjin Quanzhou
Capacity, tpa 300,000 650,000 200,000
Completion 2009 2009 2009 2010 2010 2010 2010 2011 2011 2011 2012 2012 2012 2012 2013 2013
Dushanzi Baotou Dushanzi Ningbo Daqing Tianjin Tianjin Fushun Pengzhou Fushun Pengzhou Dalian Dalian
300,000 300,000 600,000 450,000 200,000 300,000 300,000 350,000 300,000 400,000 300,000 350,000 400,000
Source: BMI, ICIS
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Table: Chinas Petrochemicals Sector PP Projects
Company CNPC Guangxi Petrochemical Datang International Power Generation Co Fujian Refining & Petrochemical Co (FREP) Jinxi Petrochemical Shenhua Ningxia Coal Group Co Yanchang Petroleum Group Liaoning Huajin Tongda Chemical Co Ningxia Baota Petrochemical Dushanzi Petrochemical Baotou Shenhua Coal Chemicals Zhenhai Refining and Chemical Co (ZRCC) Daqing Petrochemical Co Tianjin Petrochemical/Sabic Xinjiang Guanghui Industry Co Fushun Petrochemical Co PetroChina Sichuan Petrochemical Co (PSP) Shanghai Petrochemical Co (SPC) Sinopec/SK Corp Dalian Shide Group PetroChina Hohhot Petrochemical Co
Region Guangxi Inner Mongolia Fujian Liaoning Ningxia Shaanxi Liaoning Ningxia Xinjiang Inner Mongolia Zhejiang Heilongjiang Tianjin Xinjiang Liaoning Sichuan Shanghai Hubei Liaoning Inner Mongolia
Location na Chifeng Quanzhou Huludao Yinchuan na Panjin Ningxia Dushanzi Baotou Ningbo Daqing Tianjin na Fushun na Shanghai na Dalian Hohhot
Capacity, tpa 200,000 500,000 450,000 150,000 520,000 200,000 250,000 80,000 550,000 310,000 300,000 300,000 450,000 300,000 300,000 450,000 300,000 400,000 660,000 100,000
Completion 2009 2009 2009 2009 2009 2009 2010 2010 2010 2010 2010 2011 2011 2011 2012 2012 2012 2012 2013 na
na = not available/applicable. Source: BMI, ICIS
Table: Chinas Petrochemicals Sector PS Projects
Company Total Petrochemicals China Formosa Plastics Industrial Co (Ningbo) Dushanzi Petrochemical Yanchang Petroleum Group Dalian Shide Group
Region na Zhejiang Xinjiang Shaanxi Liaoning
Location Southern China Ningbo Dushanzi na Dalian
Capacity, tpa 250,000 100,000 130,000 250,000 200,000
Completion 2009 2010 2010 2011 2013
na = not available/applicable. Source: BMI, ICIS
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Upstream
The National Development and Reform Commission (NDRC) has said that it plans to close down refining facilities with capacities of less than 1mn tpa 20,000b/d by 2011 in order to improve efficiency and quality in the refining industry. It is also encouraging the closure or merger of refining facilities with capacities of 1-2mn tpa (20,000-40,000b/d) and will prevent the development of new refineries that process heavy oil and bitumen. This forms part of the governments bid to improve the structure of the oil and petrochemicals industries and raise their overall global competitiveness. The NDRC has not given details of the amount of capacity it expects to take offline. The move could lead to the closure of many smaller, privately owned refineries that are struggling to secure feedstock.
An inadequate supply of energy threatens to undermine future growth in Chinas petrochemicals sector, according to a recent joint report from the State Bureau of Statistics, the NDRC, the Assets Supervision and Administration Commission and the Ministry of Finance. With the IEA predicting China will have to import half of its crude oil by 2010 and 60% by 2020, the government is concerned about future economic growth, citing the petrochemicals sector as a particularly heavy energy consumer. At present, China is highly dependent on the Middle East for its oil requirements. The country is initiating efforts towards diversifying its sources of imported oil and also encouraging domestic companies to buy overseas oil assets. The objective is to increase oil supply from neighbouring areas such as Central Asia, Russia, Australia and South East Asian countries, so as to reduce dependence on Middle Eastern crude.
Chinas preferred countries for crude oil sources have rich resources and low development costs, which are expected to bring efficiencies to the Chinese petrochemicals sector. By 2010, we estimate that demand for refined oil will be 2.3 times higher than it was in 2000 and demand for petroleum products will be 3.2 times higher. This has produced concern in the CPCIA, which in January 2006 called for the government to introduce measures to reduce investment in the sector, because existing producers could expect to find it difficult to source sufficient feedstock to keep production capacity at current levels. The CPCIA also said smaller producers of methanol, caustic soda and calcium carbide in particular needed to modernise their production facilities to increase energy efficiency. The organisation also stated that all petrochemicals producers should use new technology wherever possible, as well as altering their product mix to better reflect market demand.
Although feedstock supply and costs mean that Chinese petrochemicals producers are at a disadvantage compared with Middle Eastern producers notably Saudi Arabia a recently built petrochemicals complex in China can be very competitive, mainly because of low labour and construction costs in the country. According to US-based research organisation SRI Consulting, China can build petrochemicals plants with local construction and engineering labour, equipment, machinery and materials. As a result, a petrochemicals facility built in China can cost one-third less than an identical plant on the US Gulf Coast, the report claims.
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Olefins
Sinopec has revived its 800,000tpa ethylene project at Wuhan city, which had been delayed for a year from its initial schedule. Work is now set to be completed by the end of 2012 with the plant coming onstream in H113. Downstream capacities will include 300,000tpa HDPE, 300,000tpa LLDPE and 400,000tpa PP. Sinopec will own a 65% stake with the remaining 35% owned by South Koreas SK Energy.
In July 2009, Shanghai Secco (50% BP, 30% Sinopec and 20% Shanghai Petrochemical Company) completed the expansion of its ethylene plant at Caojing. The removal of the existing bottleneck raised capacity by 200,000tpa to 1.1mn tpa. The project is intended to improve the crackers feedstock flexibility by increasing liquefied petroleum gas (LPG) and naphtha cracking capacities.
Sinopec has indicated that it plans to increase the capacity of its Fujian refinery by 100% to 480,000b/d between 2010 and 2015. Its JV with ExxonMobil and Saudi Aramco, worth US$5bn, is currently undergoing an expansion of capacity from 80,000b/d to 240,000b/d, with completion slated for the end of the year. In addition, the company has signed an MOU with the Fujian provincial government to carry out a feasibility study into raising capacity at its ethylene cracker from 800,000tpa to 1mn tpa.
SunVic Chemical Holdings (SunVic) began construction of a 230,000tpa propylene plant at Xiangshui, Jiangsu province in June 2008. It was due to be completed by December 2009 and will be linked to a fluid catalytic cracker that will use fuel oil as feedstock. SunVic will consume the propylene. It currently buys up to 143,500tpa of propylene for use in its 205,000tpa acrylic acid plant. The plant supplies a 250,000tpa acrylate ester facility. Aside from producing propylene, the cracker will also produce gasoil, gasoline and LPG, which will be marketed.
In June 2008, Qatar Petroleum (QP), Shell China and PetroChina signed a letter of intent to launch a study into the viability of a new petrochemicals complex in China. PetroChina will have a 51% stake in the JV, while QP and Shell will each hold 24.5%. The partners have not disclosed the location of the proposed plant or size of investment. If it goes ahead, it would be Qatars first refining and petrochemicals investment in China and Shells first refinery in the country.
In April 2008, Sinopec announced plans to build a 1mn tpa ethylene facility on Hainan Island in southern China, after signing a framework deal with the provincial government. The project has won central government approval and construction is expected to begin before 2010.
Beijing Yanshan Petrochemical, which merged with Beijing Dongfang Chemical in January 2003, is the largest ethylene producer in China, producing around 990,000tpa. The second largest producer is Shanghai Petrochemical, which typically produces 950,000-960,000tpa, higher than its 850,000tpa
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nameplate capacity. Qilu Petrochemical spent CNY4.6bn (US$600mn) to expand its ethylene production capacity by 270,000tpa to 720,000tpa, but it too produces at least 100,000tpa in excess of its nameplate capacity. Yangzi Petrochemical also operates beyond capacity, at 780,000-810,000tpa. CNPC subsidiary Daqing Petrochemical has cracker capacity of around 550,000tpa and Jilin Chemical Industrial over 500,000tpa.
Shanghai Secco Petrochemical, a JV between BP Chemicals (50%), Sinopec (30%) and Shanghai Petrochemical (20%), completed its US$2.7bn complex in the Shanghai Chemical Industry Park in 2004, coming onstream in April 2005. Although BP spun off its petrochemicals division to Innovene, which was later sold to Ineos, it kept its stake in Shanghai Secco in order to ensure acetic acid feedstock for Yangtze River Acetyls in Chongqing, a JV between Sinopec and BP, and BP YPC Acetyls in Nanjing. Shanghai Secco has an ethylene production capacity of 900,000tpa and 600,000tpa of propylene capacity. The plant also produces 260,000tpa of acrylonitrile.
Intermediates
In January 2011, Ineos Phenol and Sinopec Yangzi Petrochemical Company signed an MoU agreeing the framework for the design and future operation of a phenol-acetone JV at the Nanjing chemical park. The new complex will produce 400,000tpa phenol and 250,000tpa acetone, making it the largest of its kind in China. The new complex will include a 550,000tpa cumene plant, which will be used in the phenolacetone complex. The project is expected to be completed at the end of 2013.
In December 2010, Dynasol, a JV between Repsol and Mexicos Kuo Group signed an agreement with Shanxi Northern Xingan Chemical Industry to jointly produce and market synthetic rubber in China. Dynasol and Xingan will form a 50:50 JV company that will build a synthetic rubber manufacturing plant in Liaoning province in China, with capacity of 100,000tpa. Construction is expected to begin in 2011 and the plant is expected to become operational in 2013.
In December 2010, Taiwans Far Eastern New Century Corporation (FENC) and Sinopec subsidiary Yizheng Chemical Fibre (YCF) announced a preliminary agreement to establish a 60:40 JV that would build a PTA plant at the Yangzhou Chemical Industrial Park. The National Development and Reform Commission granted a license to YCF to build a 1mn tpa PTA unit with an investment of CNY3.8bn billion. FENC is to apply to Taiwans Investment Commission (Taipei) for authorisation to join YCF in the project.
In November 2009, Mitsui Chemicals and Sinopec announced they had reached an agreement to build a world-scale phenol and acetone complex as well as an ethylene-propylene-butadiene polymer plant at Caojing near Shanghai, with a total investment of CNY60bn (US$660mn). The two partners already operate a 120,000tpa bisphenol A plant at Caojing, operated under their 50:50 Shanghai Sinopec Mitsui
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Chemicals (SSMC) JV. The new complex will be designed to produce 250,000tpa phenol and 150,000tpa acetone and will be owned by SSMC. Commissioning is scheduled for Q213. In addition, Sinopecs Shanghai Gaoqiao Companys existing phenol complex, designed to produce 125,000tpa phenol and 75,000tpa acetone, will be merged into the JV, giving the group a total of 375,000tpa phenol, 225,000tpa acetone and 120,000tpa bisphenol A capacity. Mitsui Chemicals and Sinopec are also conducting a feasibility study into a project at Caojing, which will be designed to produce 75,000tpa ethylenepropylene-diene terpolymer with completion scheduled for Q413.
In October 2009, Sinopec Shanghai Petrochemical said it had started up a 600,000tpa paraxylene facility at its Jinshan complex. The plant uses technology licensed from UOP, a Honeywell subsidiary, and also includes one of UOPs CCR Platforming units, which convert naphtha to aromatics and hydrogen, and a UOP Isomar unit that converts other xylenes to paraxylene. The plant also produces 280,000tpa of benzene.
In January 2009, the Ministry of Environmental Protection approved a controversial US$2bn paraxylene complex in Zhangzhou. Local residents and environmental groups had opposed the project over fears of pollution. The plant is being built by Tenglong Aromatic Hydrocarbon Company, but the site has been moved from Xiamen, Fujian province. BMI believes the capacity of the complex will be 800,000tpa and that it will not come online until 2013.
By 2006, Chinese styrene monomer (SM) demand exceeded domestic production by 200%, despite largescale expansions in capacity. The deficit was made up by imports from Japan (37%), South Korea (32%), Saudi Arabia (8%), the US (8%) and Singapore (6%). In 2005 and 2006, 1.36mn tpa of SM production capacity was added, bringing output up to 2.0mn tonnes in 2006. Increased capacity comprised 500,000tpa of extra capacity at Shanghai Secco, 150,000tpa for Changzhou Donghao Chemical Trade, 560,000tpa for CNOOC and Shell Petrochemicals Co and 150,000tpa for Shuangling Chemical Industry.
Production expansion programmes for VCM implemented between 2004 and 2006 were based on the carbide-acetylene method, with total added capacity of 2.5mn tpa. Expansion projects based on the ethylene method include 200,000tpa by Tianjin Dagu Chemical, 350,000tpa by Tianjin LG Bohai Chemical and 200,000tpa by Xinpu Chemical.
In September 2007, construction on the second phase of the 200,000tpa PVC unit of a 400,000tpa PVC project by Xinjiang Tianye Company was started in Shihezi, Xinjiang. The entire project has a total investment of CNY6.0bn. It was approved by the NDRC in February 2007 and construction of the firstphase 200,000 tpa unit was started in March 2007. The second phase covers 12 new facilities and its construction was started when the first phase unit was approaching completion. The entire project was completed in October 2008. Also in September 2007, the Jilantai Salt Chemical Group Company
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completed and brought onstream its first phase 200,000tpa PVC unit of a 400,000tpa PVC project in the Inner Mongolia Alasan Economic Development Zone. The project has a total investment of CNY5bn.
In November 2007, Hanbon (Jiangyin) Petrochemical Company began construction work on a 600,000tpa PTA project in Jiangyin, Jiangsu province. Hanbon is a JV between Jiangyin Chengxing Industrial Group and Hong Kong Hanbon Petrochemical Company. With a total investment of around CNY2.77bn (US$348mn), the project is expected to be completed and onstream at the end of 2009. It is one of three projects approved by the NDRC in July 2006. The others were: Cangzhou Chemical and Hong Kong-based Huashida Chemicals JV 120,000tpa caprolactam plant at a cost of CNY3.67bn (US$461mn) and a JV between Funeng Holdings and Huali Finance to produce 800,000tpa of polyxylene (PX) at a cost of CNY10.78bn (US$1.35bn).
In February 2008, INEOS Phenol announced it will invest in a 400,000tpa phenol plant in Zhangjiagang, Jiangsu province. The company said that Chinas NDRC, the Ministry of Commerce and the Zhangjiagang Administration of Industry and Commerce had all approved the unit, which would also produce 250,000tpa of acetone. Completion is scheduled for the end of 2009.
Integrated Projects
Sinopec In December 2010, BASF and Sinopec agreed to study a further expansion of the companies BASF-YPC Company (BYC) petrochemical JV at Nanjing with total investments of about US$1bn. BYC, a 50:50 JV between BASF and Sinopec Yangzi Petrochemical, brought a new US$2.9bn ethylene plant online in May 2005 near Sinopec Yangzi Petrochemicals plant in Nanjing. The cracker has a capacity of 600,000tpa and is integrated with plants manufacturing 160,000tpa of acrylic acid and 250,000tpa oxo alcohol, as well as formic acid, propionic acid, methylamine, dimethylformamide and other high performance chemicals. A variety of propylene derivatives, excluding PP, are also made there. A US$900mn expansion programme involved increasing capacity of BYCs ethylene plant from 600,000tpa to 750,000tpa in 2010, expanding EO capacity and developing EO derivatives production, developing C4 specialties production based on butadiene and isobutene raw materials, developing superabsorbent polymers manufacture and expanding oxo-alcohols and propionic acid capacity. Yangzi-BASF Styrenics, a manufacturer of styrene monomer, PS and expanded PS, is also being included in BYC.
The projects currently under consideration include a world-scale hydrogen peroxide-propylene oxide (HPPO) facility. The companies would also extend the Nanjing complex's C3 and C4 value chains, including construction of a second acrylic acid plant and a butyl acrylate unit. Capacity would be increased at the site's 2-propylheptanol, styrene, and nonionic surfactant plants. The planned acrylic acid unit will double capacity at the Nanjing site to 320,000tpa. The facility would supply feedstock to a planned superabsorbent polymers unit. Other capacity details were not disclosed.
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In May 2010, Sinopec and Sabic announced the start-up of commercial production at their new petrochemical complex at Tianjin. The two companies formed Sinopec Sabic Tianjin Petrochemical Company in November 2009, as a 50:50 JV to build and operate a 3mn tpa petrochemical complex. Initial production at the complex, based on a 1mn tpa ethylene plant and including eight downstream facilities including polyethylene, ethylene glycol, polypropylene, butadiene, phenol, and butene-1, began in January 2010. Downstream plants producing 40,000tpa eythlene oxide and 360,000tpa ethylene glycol based on Dow Chemicals Meteor process technology were started up in May.
Sinopec finished construction on an ethylene project at the Zhenhai refinery in Ningbo, Zhejiang Province in December 2009. The project has capacity to produce 1mn tpa of ethylene, costing CNY23.5bn to complete. After completion of the ethylene project, the Zhenhai refinery became the countrys largest refinery and the biggest ethylene production base. In April 2010, Sinopec put a 450,000tpa PE unit into operation at the Zenhai site, completing the project. Sinopec Zhenhai was scheduled to bring onstream a propylene oxide (PO) and SM plant in Zhejiang province by 2010. It would produce 270,000tpa of PO and 600,000tpa of SM. It was one of the downstream units of the new ethylene plant. Construction of the POSM plant is still in the planning stage. Lyondell Chemical Co and Sinopec Zhenhai set up a JV in January named Ningbo Zhenhai Refinery Lyondell Chemical Co Ltd to run the plant. Plant output is intended for the domestic market.
In Q110, Ineos Phenol and Sinopec Yangzi Petrochemical began planning a JV to build and operate Chinas largest phenol and acetone manufacturing site at the Nanjing Chemical Industrial Park. The new facility will have capacities of 400,000tpa phenol, 250,000tpa acetone and 550,000tpa cumene. The project is expected to be completed in 2013.
Sinopec also indicated in Q110 that it was considering a partnership with ExxonMobil and Saudi Aramco to expand its existing integrated oil refinery and petrochemical complex in Fujian with a refinery to process 12mn tpa crude and 1mn tpa ethylene plant.
In February 2010, Sinopec indicated that it will building a 200,000b/d refinery with a downstream 200,000tpa PP plant by 2011 at Tieshan port near Beihei in Guangxi province. The company is planning to move a 12,00b/d refinery from Beihai to the new site.
Sinopecs expansion plans are focused on fully integrated petrochemicals development. Sinopec is expanding its Tianjin refinery by 7.5mn tpa to 12.5mn tpa, which will be integrated with a petrochemicals complex that will include 1.2mn tpa of ethylene, 600,000tpa of PE, 400,000tpa of PP and 450,000tpa of MEG capacity. Slow progress on the Tianjin project has prompted Dow Chemical to quit its stake in the JV in favour of a JV with Siam Cement in Thailand. In November 2009, Sinopec and Sabic inaugurated their new petrochemical complex in Tianjin. The CNY18.3bn (US$2.6bn) 50:50 JV, originally signed in January 2008, includes a 1mn tpa ethylene cracker and eight downstream units and utilities. The units
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began production in H110, with total output of 3.2mn tpa, including ethylene, ethylene glycol, PE, PP, butadiene, phenol and butene-1. In May 2010, the complexs EO-EG units, using Dows Meteor process, were brought online with capacity to produce 40,000tpa EO and 360,000tpa EG. The EO unit is the countrys single largest EO reactor. The Meteor process is designed to allow manufacturers to produce EO-EG with fewer steps, less equipment, and smaller plot size requirements.
In May 2010, the National Development and Reform Commision (NDRC) gave preliminary approval to a US$9bn refinery and petrochemicals JV between Sinopec and Petrochemicals Industries Company (PIC), a subsidiary of Kuwait Petroleum Corporation (KPC), at Donghai Island near Zhanjiang in Guangdong province. The partners must submit the results of a feasibility study and an environmental impact assessment to NDRC to obtain final approval for the project. Sinopec will hold 50% of a JV, with PIC owning 30% and Dow Chemical confirmed as one of two additional overseas partners in the project. The remaining partner will replace Shell, which pulled out of the project in late 2009. Talks have been held with BP and Total as Shells replacement. The Donghai Island complex is to consist of a 1mn tpa naphtha cracker and include downstream polyolefin and EG plants. Approval from the Chinese authorities is expected by the year-end and start up of the complex is scheduled for 2013.
In June 2008, SK Energy confirmed that it would participate in a JV with Sinopec for the construction of a cracker and derivatives complex at Wuhan. SK Energy will have a 35% stake, which was higher than the 25% initially offered by Sinopec. It will invest US$960mn in the complex, with the overall cost of the cracker and derivatives complex estimated at about US$2.2bn. Construction on the cracker began in late 2007 and it is set to go online in 2011. It will use naphtha as feedstock and will have capacity for 800,000tpa of ethylene. Derivative plants will have capacity for 300,000tpa of HDPE, 300,000tpa of LLDPE, 400,000tpa of PP, 100,000tpa of ethylene oxide and 380,000tpa of ethylene glycol.
A refining and olefins project, initially planned as a JV between Sinopec and Shanghai Chemical Industry Park (SCIP), has been suspended by the government. The Chinese government has said it will delay approval for the 10mn tpa refinery and 1mn tpa in 2008 as it is prioritising crackers at other locations. Chinas environmental protection authorities have also requested that SCIPs current investors submit information for an environmental risk assessment of the site, including the planned refinery and cracker. As a result of the delay, construction of the project has been put back to 2009 and will not be able to meet its scheduled start-up in 2012. Sinopecs Shanghai Petrochemical subsidiary is also waiting for government approval to expand ethylene capacity to 500,000tpa at its 950,000tpa plant at Jinshan.
PetroChina Shell is studying a refinery and petrochemicals JV project at Taizhou in which PetroChina is likely to have a 51% stake and Shell and QP 24.5% each. The complex is expected to include a 440,000b/d oil refinery and 1.2mn tpa petrochemicals complex.
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In September 2007, PetroChina outlined plans to fund six upstream, refining, petrochemicals and pipeline development projects with the proceeds from an initial public offering. PetroChina wants to issue up to 4bn yuan-dominated A shares on the Shanghai Stock Exchange, with the share sale possibly complete in October 2009, raising CNY40bn (US$5.3bn). The projects include crude production capacity expansion at its Changqing, Daqing and Jidong oil fields; expansion and upgrade of refining and petrochemical facilities at its Dushanzi Petrochemical Company and Daqing Petrochemical Company; and an 850km new oil products pipeline connecting Lanzhou in north-western Gansu province with Zhengzhou in central Henan province and Changsha in southern Hunan province. The State Environmental Protection Agency has cleared PetroChinas application for environmental impact assessments of these projects.
Under the plans, the 6mn tpa Dushanzi refinery in the north-western Xinjiang autonomous region is undergoing an expansion: an upgrade programme will add 10mn tpa of refining capacity and 1mn tpa of ethylene production capacity. According to reports in June 2009, the ethylene plant was due to come onstream in September 2009, ahead of the 2010 deadline. Feedstock will come from crude oil imported directly from Atasu in Kazakhstan via a 1,000km pipeline to Xinjiang. This first phase 1,000km pipeline worth US$700mn is expected to transmit 20mn tpa of crude to China. The project was jointly developed by CNPC and KazMunaiGaz, Kazakhstans state oil company. PetroChina also plans to invest in an ethylene production expansion project at its Daqing Petrochemical Company in Heilongjiang province, which will double output capacity to 1.2mn tpa. The US$3.2bn Dushanzi Petrochemical complex will also have plants to produce 600,000tpa of LDPE, 300,000tpa of HDPE, 320,000tpa of SM, 130,000tpa of PS, 550,000tpa of PP and 240,000tpa of benzene, and is scheduled for completion in 2010.
PetroChina subsidiary Liaoyang Petrochemical Companys 1.4mn tpa naphtha reformer was due to be completed by the end of July 2010 with commercial operation scheduled to start in September. Capacity includes 700,000tpa isomer-grade mixed xylenes and 150,000tpa benzene. The company has an existing 500,000tpa naphtha reformer that provides output to serve as feedstock for its 350,000tpa No. 1 paraxylene plant. Its No. 2 PX plant has capacity to produce 450,000tpa isomer-MX as raw material. Before the start-up of the new reformer, over 60% of its isomer-MX feedstock requirements were outsourced.
In July 2010, Petrochina opened a new large-scale fertilizer plant at Korla in the Xinjiang Uygur autonomous region. The plant began construction in 2007. It has capacities of 450,000tpa ammonia and 800,000tpa urea.
In January 2010, Lummus Technology was awarded a contract by PetroChina subsidiary Jilin Petrochemical for the license and process design of an ethylbenzene and styrene complex at Jilin. The complex will have capacity for 320,000tpa styrene and use proprietary technologies provided by Lummus in cooperation with UOP. The plant is expected to start operating in 2011.
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In August 2006, PetroChina broke ground on its new refining and petrochemicals complex at Fushun in Liaoning Province. The project will boost annual oil refining and ethylene production to 10mn tonnes and 1mn tonnes respectively. The new complex will consist of 13 large-scale main installations, including an 8mn-tonne atmospheric vacuum unit and an 800,000-tonne ethylene-producing unit. We project that petrochemicals operations will begin in 2012 or 2013.
PetroChina has also broken ground on its US$2.5bn, 800,000tpa ethylene plant in Chengdu. The company expects the project to be completed by 2010. PetroChina holds a 51% stake in the new plant, with the remaining 49% held by Chengdu Petrochemical, a project company established and owned by the local government. The plant represents the biggest industrial investment in Sichuan province and the second largest ethylene production facility in the western region after PetroChinas Dushanzi cracker in Xinjiang Uygur Autonomous Region. The Chengdu plant is expected to use feedstock from PetroChinas Lanzhou refinery, which is doubling its capacity to 10.5mn tpa. Output from the plant particularly PE and glycol will supply the local market in south west China, which PetroChina says is currently undersupplied. The company is also considering building a new refinery near Chengdu and has submitted plans for government approval.
In December 2007, Uhde was selected by PetroChina to carry out engineering work on two HDPE plants, located at Chengdu and Fushun. The plants will use LyondellBasells Hostalen HDPE technology. The Chengdu plant will have capacity to produce 300,000tpa, and the Fushun unit will produce 350,000tpa. Completion of both units is slated for 2011.
CNOOC Shell is in discussions with CNOOC to create a new US$7.5bn refinery and petrochemicals complex, which will form phase two of their existing 50:50 JV, CSPC, at Huizhou. According to reports in early 2011, CNOOC says that Shell is interested in a 30% stake in the refining project and it is will to transfer a 20% portion of its stake in CSPC to secure the deal. Government approval is expected some time in H111. Refining throughput will be 10mn tpa and ethylene capacity will be 1mn tpa, with the plant due to come onstream in 2014. The project would build on the existing CSPC site at Daya Bay Huizhou, Guangdong province, which was recently expanded by 150,000tpa to 950,000tpa and is set to rise by another 50,000tpa. Capacities of the downstream units have also been expanded by 10%-30%.
CNPC In September 2010, Russian energy company Rosneft and CNPC began construction of a US$5bn JV refinery and petrochemical complex at Tianjin. The refinery will have a throughput of 13mn tpa of crude and is scheduled for completion in 2015. The refinery will produce aromatics and PP, as well as refined products and liquefied petroleum gas. Rosneft holds a 49% stake in the JV and about 70% of the crude oil will be supplied by Russian firms. CNPC is the parent of PetroChina.
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CNPC has spent CNY3.867bn (US$486mn) upgrading its Urumqi Petrochemical Complex. The company has increased PX output from 80,000tpa to 1mn tpa and built a new 1.5mn tpa PTA plant. A second phase of the project is now under way, which will install facilities for the production of phenol, acetone, caprolactam and aniline. Maleic anhydride and polycarbonate production is also being considered for a later stage.
Coal-Based Chemicals
The Chinese governments economic policy is shifting from growth at any cost to one of adding value to output, which will guide the development of the petrochemicals industry over the medium to long term. The rising cost of oil imports is prompting the Chinese authorities to utilise domestic resources, notably coal which could serve as feedstock for the petrochemicals industry. Chinas desire to diversify feedstock sources away from dependence on the Middle East and is looking to its most abundant natural resource, coal, as a raw material for use in petrochemicals. China is the world's largest producer and consumer of coal. For 2010, estimates were that Chinese coal output should exceed 3bn tonnes, with consumption rising to 3,4bn tonnes. Figures released by the National Energy Administration in July 2010 showed that Chinese coal imports reached some 81.1mn tons during H110, up nearly 70% y-o-y, with coal exports dropping by 13.1%, to 10.1mn tons. Although China still has a deficit in coal, it is far smaller than its deficit in oil and gas.
Investment is being directed towards coals-to-olefins technology. Coal-based chemical projects began operations in August 2010 at Shenhua Baotous 600,000tpa methanol-to-olefins plant in Inner Mongolia, producing 300,000tpa each of ethylene and propylene. Meanwhile, the Datong Coal Mine Group is planning a 450,000tpa methanol-to-propylene plant to support a PP production unit.
In September 2010, LyondellBasell announced that its Spheripol process technology was selected by Pucheng Clean Energy Chemical for a new 400,000tpa PP plant to be built in Pucheng county, Weinan, with start-up in 2013. In November 2010, Univation Technologies licenced its Unipol PE technology to PuCheng Clean Energy Chemical Company for use in a 300,000tpa HDPE/LLDPE plant that will be built at Weinan, also to be completed by 2013. Ethylene feedstock will come from a combination of coal-tomethanol and methanol-to-olefins plants. The PP and PE plants will be part of one of Chinas largest coal-based chemicals production projects, which is expected to produce more than 2mn tpa.
In November 2010, Total and China Power Investment Corporation (CPI) signed a letter of understanding to jointly develop a coal-based petrochemical complex in coal-rich Inner Mongolia. The complex is expected to come onstream after 2015 and cost an estimated EUR2-3bn. The companies plan to launch a feasibility study into the project, which includes 1mn tpa polyolefin capacity. Total will contribute its methanol-to-olefins (MTO) and the olefin cracking process (OCP) technology. The MTO technology allows the production of propylene and ethylene from methanol, which can be obtained from
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coal. The technology, in combination with the OCP process, allows a very high yield of polyolefin production. CPI is one of China's largest energy companies producing electricity, coal and aluminum. Its coal production capacity is more than 50mn tpa.
In November 2010, Dow Chemical and Chinese coal mining company the Shenhua Group submitted a project application to the Chinese government for a US$10bn coal-to-chemicals JV at Yulin. The DowShenhua project had been on hold for about one year until Q409, partly due to delayed completion of a feasibility study. The planned complex will convert coal to methanol for production of ethylene and propylene. It will also have a chlor-alkali unit and will make a range of derivative products.
Chinas Legend Holdings announced in September 2010 that it plans to invest CNY18bn to build a 1mn tpa coal-based alkene and specialty and fine chemical complex near Shanghai. The project will be in two phases. The first involves an investment of CNY7-8bn to build coal-to-methanol, methanol-to-alkene and alkene derivative plants for completion by the end of 2013. The second phase invloves an investment of CNY10bn to expand methanol and alkene capacity and develop specialty and fine chemical plants.
Other Projects
In January 2011, Celanese announced it had signed an MoU with Wison to provide syngas for Celaneses advanced ethanol production facilities. Financial terms of the deal were not disclosed. It also announced plans to construct and operate industrial ethanol production facilities in the Nanjing Chemical Industrial Park at Nanjing and in the Gaolan Port Economic Zone at Zhuhai. The plants at Nanjing and Zhuhai will each have an initial capacity of 400,000tpa and will involve an investment of US$300mn each. Pending project approvals, they will begin industrial ethanol production within the next 30 months, Celanese says. The projects will use Celaneses newly developed technology to produce industrial ethanol, and this process combines Celaneses acetyl platform with advanced manufacturing technology to produce ethanol from hydrocarbon-sourced feedstocks. To meet future demand, the technology also allows capacity at each facility to be more than doubled at significantly less than the original investment, according to Celanese.
In October 2010, Solvay announced that it will invest EUR21mn to build a specialty polymers compounding plant at the companys site at Changshu to meet the growing demand in the country. The plant is expected to start up in Q412. The compounding plant will serve the fast growing markets for electronics, automotive, consumer and industrial applications in China, and will initially produce compounds of Amodel polyphthalamide, Ixef polyarylamide and Kalix modified polyarylamide. The facility can be expanded in the future for overall capacity and for other high performance and fluorinated polymers. Ixef and Kalix are specialty high-performance polymers for structural applications, and Amodel is a high-temperature polymer used for automotive and industrial applications where it must withstand prolonged exposure to high heat, high humidity and aggressive chemicals.
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In August 2010, Chinas Keyuan Petrochemicals acquired land adjacent to its current manufacturing operations at the Qingshi Chemical Park at Ningbo to build a styrene butadiene styrene (SBS) production facility. Construction of the 70,000tpa SBS plant began in Q310 for completion in H211. Keyuan already makes styrene, the raw material used to make SBS. Its other manufacturing facilities include benzene, toluene and xylene, propylene and methyl tert-butyl ether.
In May 2010, Abu Dhabis Borouge said it will build a compounding plant at Nansha, China, which will be the companys second compounding plant in the country. Borouge opened a 50,000tpa compounding plant at Shanghai in April, supplying compounded polyolefin resins to the growing Chinese automotive and household appliance industries. It is Borouges first manufacturing facility outside the UAE and has the potential to expand to 80,000tpa in the future. The plants raw materials will be supplied by Borouges polyolefins complex at Abu Dhabi. Construction of the Nansha plant is expected to be completed by mid2012 with production to reach up to 105,000tpa of compounded PP. Borouge is also establishing logistics hubs in Shanghai and Guangzhou in China to improve its local supply chain. Borouge is also setting up an application centre at its Shanghai facility to execute research and development and conduct product performance reviews in close proximity to its customers in the automotive and appliance markets. In January 2010, Huntsman and Jurong Ningwu Chemical Company announced a JV Jurong New Ningwu Chemical Company to develop, manufacture and sell base polyether polyol products at Jurong City. Financial details were not disclosed.
Shenhua is building another coal-to-olefins project in Yinchuan, in the north west Ningxia autonomous region. Jointly funded by Shenhua and Ningxia Coal Group, the facility will come onstream in January 2010 with a capacity of 520,000tpa. Shenhua Ningxia Coal Industry Group is building a PP plant costing CNY17bn (US$2.26bn), due to go online in 2009 or 2010. It is designed to produce 1.67mn tpa of methanol and 500,000tpa of PP. Shenhua Baotou Coal Chemicals awarded Norways Aker Kvaerner a contract in July 2007 for the engineering design and technical advice for new PP and PE facilities. The value of the project was not disclosed. In total, Ningdong energy and heavy chemical base, which uses coal as feedstock, is expected to produce 10mn tpa of liquefied oils, 830,000tpa of methanol and 1.22mn tpa of alkenes from coal by 2020. Coal production capacity of the base is expected to reach 130mn tpa before 2020, with most of the new coal output for the coal chemical industry.
Regulatory Developments
In response to concerns raised in industry circles, the CPCIA has set out plans for the restructuring of the petrochemical industry. The set of guidelines, drafted in conjunction with five domestic petroleum and chemical groups, is intended to help determine which petrochemical projects will be encouraged, which will be scaled back and which will be eliminated. The emphasis will be on the production of high-end products and reducing the excess capacity in low-end products. The guidelines recommend that China increase its crude oil processing volume to about 550mn tpa in 2015, its annual fuel output to about
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300mn tpa and its ethylene output to 21-23mn tpa. The target for ethylene capacity is below the 24.7mn tpa BMI forecasts for 2014 based on current confirmed plans. These recommendations are intended to steer the industry in the 2011-2015 development plan and were submitted to the Ministry of Industry and Information for approval in October 2009. Even before the plan has gone into effect, efforts are being directed at stemming the rate of capacity growth. In Q409, Chinese authorities began rejecting projects in the petrochemicals sector as well as other industries as they try to curb chaotic overinvestment that the government worries could lead to economic trouble.
If implemented, the strategy could lead to the cancellation or delay of two or three ethylene crackers and associated downstream units. While we caution that China will face overcapacity amid a short-term downturn in demand growth, we believe that in the long term, the limits proposed for cracker capacity could make the country more import-dependent and erode its competitiveness.
Reacting in part to fears of unplanned and unsustainable economic growth, China has moved to restrict construction of small-scale and environmentally risky chemicals and petrochemicals plants. The government has banned construction of outdated, uncompetitive chemicals plants. The ban targets local entrepreneurs who have built numerous small-scale chemicals units throughout China during the last few years, many of which are based on obsolete technology and are both inefficient and a threat to the environment. A further concern is that they could also lead to overcapacity in certain sectors. Most of these small-scale plants have been built without proper authorisation. Ethylene projects with a capacity of less than 600,000tpa are likely to be banned, along with PE projects smaller than 200,000tpa, PS projects smaller than 100,000tpa and PP projects smaller than 70,000tpa. Small-scale plants producing acetic acid, polyester, PVC and ABS are also to be banned. In addition, there are to be bans on the production of a range of dyes, paints, pesticides and pigments.
An Economic Cooperation Framework Agreement (ECFA) on intellectual property protection signed in Q210 following talks between Chinas Association for Relations Across the Taiwan Straits (ARATS) and Taiwans Straits Exchange Foundation (SEF) agreed to reduce duties on 539 commodity items imported from Taiwan, including chemicals as well as automotive parts. Tariffs in mainland China and Taiwan will fall from the current 15% to 10% in the first year, to 5% in the second year and to zero in the third year, reports say. Nearly 40% of Formosa Plastics exports to China are for the domestic market and are charged import taxes between 5% and 10%, and this trade pact would help the company to compete better in the domestic market. The remaining of the companys exports to China is used in tax-free zones for further processing and re-exporting.
BMI believes that the Chinese governments recent moves towards import substitution in equipment supplies and measures to combat pollution and high energy consumption levels are likely to raise costs in the petrochemicals sector. While we do not foresee any major impact on the price competitiveness of the sector, there are doubts that the targets are achievable.
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Yan Bangsong, the deputy chairman of China Chamber of Commerce of Metals Minerals and Chemicals Importers and Exporters (CCCMC), claims that the EUs new chemicals regulations will severely impact the Chinese chemicals industry. The EUs REACH (regulation, evaluation and authorisation of chemicals) directive came into force in June 2007, setting out a new framework for registering and assessing chemicals. It directly affects manufacturers, importers and users of chemicals across a wide range of sectors and rationalises the EU regulatory system for chemicals. The aim of the programme is to identify and phase out the most hazardous chemicals by requiring their substitution with safer alternatives wherever possible, as opposed to the old system, which was based on establishing safe levels of chemical exposure. Each of the substances covered by REACH, but not products themselves, need to be registered with the new European Chemicals Agency (ECA), based in Helsinki. The onus is on the producer of final products to ensure that any imported substances are registered with the ECA in order to trade on the European market. REACH is being phased in with the most hazardous substances targeted initially.
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Business Environment
Petrochemicals Business Environment Ratings
BMI has revised its method of risk scoring in the petrochemicals sector, introducing dynamic scores that reflect on future growth as well as current capacities and the size of the internal market, along with investment risk assessments of the political, economic and regulatory environments. In the Asia Petrochemicals Business Environment Ratings matrix, Chinas score is 79.1 points, up 0.5 point since the previous quarter due to an improvement in country risk scores. With South Koreas 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 Chinas 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.
Table: Asia Pacific Petrochemicals Business Environment Ratings
Limits of potential returns Petroch emicals market 73.3 93.3 80.0 60.0 70.0 70.0 53.3 40.0 76.7 46.7 20.0 10.0 Country structur e 90.1 65.6 83.5 90.8 76.6 59.6 68.8 90.7 38.1 39.8 51.2 44.5
Risks to realization of returns Petroch emicals rating 79.6 79.1 78.0 74.3 72.9 66.9 63.6 63.4 63.3 46.7 39.3 30.5
Country Japan China South Korea Singapore Taiwan Thailand Malaysia Australia India Indonesia Philippines Vietnam
Limits 79.2 83.6 81.2 70.8 72.3 66.3 58.7 57.7 63.2 44.3 30.9 22.1
Market risks 85.0 55.0 80.0 90.0 75.0 75.0 80.0 75.0 70.0 60.0 75.0 60.0
Country risk 78.7 74.4 66.3 79.3 74.1 65.3 72.8 77.4 60.9 49.4 51.9 45.9
Risks 80.6 68.6 70.4 82.5 74.4 68.2 74.9 76.7 63.6 52.6 58.8 50.1
Rank 1 2 3 4 5 6 7 8 9 10 11 12
Scores out of 100, with 100 highest. Source: BMI
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Limits Of Potential Returns This rating is a composite of our scores for the domestic petrochemicals market and Chinas country structure score, which assesses physical, financial and trade infrastructure. In this category, China scores 83.6.
The petrochemicals market score measures our combined scores for current capacity in ethylene and polymer production as well as five-year growth projections for cracker capacities. China scores 93.3, which is the highest in the region with the countrys petrochemical industry now rivalling the worlds largest petrochemical producer, the US. Between 2009 and 2014, Chinas ethylene capacity is set to rise by a third to 20.91mn tpa, with an equivalent rise in polymers capacities.
The country structure rating comprises BMIs scores for financial and physical infrastructure and trade bureaucracy. In this category, China scores 65.6. Although the country possesses an above-average financial infrastructure, it is largely debt ridden, with glaring regional income inequalities. Significant government investment in the energy sector over the last five years has ensured abundant power supply.
Risks To Realisation Of Returns This rating comprises the ratings for market and country risks, weighted towards market risks. In this category, China scores 66.7, up 0.1 point since the previous quarter.
The market risk rating measures the regulatory environment of the petrochemicals sector. In this category, China scores 55.0, a relatively low score that has come under pressure due to the uncertainties arising from the diversion of naphtha from ethylene to fuel production, leading to cuts along the petrochemicals chain. With the gap between Chinas ethylene nameplate capacities and total requirements forecast to reach 25.7mn by 2015, the actual shortfall in ethylene output is likely to be far higher when taking into account lower operating rates. Although Chinas petrochemicals industry has been dominated by a few SOEs, the country is now trying to move towards a more competitive regime. China is also looking at attracting higher levels of foreign investment, particularly through JVs with petrochemicals majors. The country has made reasonable efforts towards this in the face of US criticism of Chinas inability to reduce market entry barriers and reform its existing intellectual property regime. However, foreign investors continue to complain of unnecessary bureaucratic delays, with some threatening to abandon projects in favour of countries with more efficient and transparent regulatory systems. Chinas restrictions on foreign investment and its requirement that refiners absorb the cost of oil price rises means that the country lags behind Thailand in this category.
The country risk rating covers the long-term economic, financial and political risks and the structure of the economy. The country is known to be almost completely immune to external shocks. Policies are expected to be largely stable in the long run with no major surprises in store. However, without much in terms of reforms in the recent past, Chinas legal system is disappointing. The country is also known to be
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plagued by high levels of corruption. But the current government, under the leadership of President Hu Jintao and Premier Wen Jiabao, seems focused on tackling these issues. China scores 71.8 in this category, up 0.2 points since the previous quarter due to a slight improvement in risk ratings.
Chinas Foreign Investment Policy

As repeated surveys and actual FDI flows bear out, China remains the top emerging market destination for foreign investors. Low labour costs as well as better competitiveness and productivity rates give China a leading edge in the manufacturing and assembly sectors the dominant areas for FDI inflows.
Since the early 1990s, China has substantially reformed its investment regime and foreign investors are now able to manufacture and sell a wide variety of goods on the domestic market. In the mid-1990s, China authorised the setting up of 100% foreign-owned enterprises the preferred vehicle for FDI. This precipitated the rampant FDI performances of recent years. However, there is concern that the governments concentration on luring investment to the manufacturing sector has led to saturation and overcapacity. UN Conference on Trade and Development (UNCTAD) figures show that China pulled in US$74.8bn in FDI in 2007, setting yet another record.
The government wants to make the service sector a key area to attract foreign investment. China is to channel FDI into R&D centres, new high-tech industries, advanced manufacturing and the energy conservation sectors.
Wholly owned foreign enterprises are now the most popular entry route for investors. Since the late 1990s, the authorities have attempted to direct FDI towards encouraged industries and regions, bringing in new incentive schemes for investments in high-tech industries and in the central and western parts of the country. A revised list came into effect in April 2002, outlining areas and sectors where foreign investment would be encouraged, restricted or prohibited. The raft of investment incentives developed over the past two decades mainly centre on the special economic zones. The list is partly intended to abide by the promised sectoral openings that were part of Beijings WTO accession agreements: opening up banking, insurance, petroleum extraction and distribution. For example, the upper limit is 20% for a single foreign investor in one Chinese bank and combined foreign shareholding in banks is not allowed to exceed 25%.
Regulations issued in November 2002 have eased foreign investment intended for the acquisition of stakes in Chinese companies. Non-Chinese investors can now purchase traded and non-traded (state-held) shares of Chinese companies. However, foreign investors have been put off by the requirement to undergo an extensive approvals process with trade unions.
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China allows for full profit repatriation and since the mid-1990s, foreign investors have broadly had free access to foreign exchange. Since WTO accession, an overhaul of regulations has been implemented to improve intellectual property rights. The country has committed to full compliance with the WTO Agreement on Trade-Related Aspects of Intellectual Property (TRIPS), as well as other TRIPS-related commitments. But enforcement remains negligible with penalties frequently failing to be imposed.
Most FDI remains focused on the export-oriented manufacturing and assembly sectors. But services mainly tourism, telecoms and finance form a growing proportion of the FDI stock in China. The top sectors in terms of attracting FDI are chemicals, machinery and industrial goods as well as IT including software. The main sources of investment are Japan, the US and Germany.
Foreign Trade Regime

In line with its WTO accession requirements, China has lowered its import tariffs. In 2006, the general tariff level on imports was 9.9%, more than 40% lower than the early 1990s level. The commitment to lower tariffs has been borne out by thriving import levels, which have surged faster than Chinas exports in recent years. China is now the worlds third biggest importer.
The government has pursued multilateral agreements as a priority, with a series of regional and bilateral free trade negotiations under way as part of its wider commitments under the Doha Development Round. Chinas formal accession to the WTO in December 2001 cemented its integration into the global economy. The two key bilateral deals were the EU-China agreement signed in May 2000 and the USChina agreement signed in November 1999. Beijing is actively pursuing regional trade deals, with recent progress towards a free trade agreement (FTA) between China and the 10-member Association of South East Asian Nations (ASEAN). It has also initiated FTA talks with the Southern African Customs Union (SACU) and the Gulf Co-operation Council (GCC). The possibilities of FTAs with Australia, New Zealand and Chile are also under study.
In January 2002, China implemented tariff cuts required as part of its WTO accession agreement and beefed up access to trading rights. This was followed one year later by a further lowering of tariffs, again dictated by the WTO. China has substantially reduced the number of goods subject to import quotas and is committed to phasing out remaining quotas. Licensing procedures have been streamlined to comply with transparency requirements.
Some WTO commitments have been met ahead of schedule and there are ongoing plans to further liberalise trading rights. China may apply tariff rates significantly lower than the published most-favoured nation (MFN) rate in the case of the goods industry. Import tariff rates are divided into three categories: general rates, MFN rates and Bangkok Agreement rates, applying to ASEAN members.
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Non-tariff barriers remain in force. China has agreed to drop all agricultural export subsidies as part of the WTO agreement. However, criticism has been voiced over the countrys lack of adherence to trade agreements, particularly when discretionary elements are involved specifically the absence of implementation on intellectual property rights protection.
US officials have also accused Beijing of intervening to keep the yuan artificially low, thereby boosting its exports to the US and creating a debilitating trade surplus. However, the Chinese government appears likely to resist pressure to adjust its currency regime solely to suit US whims. Concerns also remain over inconsistencies in the legal system, as well as over government attempts to control trade flows through the deployment of import and export licenses. The government retains regulatory controls through commodity inspections and a plethora of registration requirements.
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Industry Forecast Scenario

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 worlds 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, Sinopecs urea output slumped 30%, to 1.22mn tonnes. Sinopec, however, reported a drop in urea production by 30%, to 1.22mn tonnes. The companys 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-oy 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
Monthly Ethylene And Plastic Output (10,000 tonnes) 2010
Source: BMI
has primarily affected the construction and automotive sectors, which had made orders on the basis of assumptions of strong 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.
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As a result of the strengthening yuan and lower US PE prices putting pressure on local suppliers prices, BMIs outlook in 2011 is not as bullish as 2010. BMI continues to forecast lower demand growth rates compared as a result of a more restrictive fiscal and monetary stance by the government, which will seek to temper inflationary pressures. An upturn is expected by H211. Government attempts to tighten lending could have a significant effect on domestic petrochemicals demand and pricing, with little attempt to limit capacity growth. In the recent past, easy lending conditions have sustained consumer demand for finished products that utilise petrochemicals, as well as the housing sector, which also creates demand for synthetic fibres and PVC piping. If a tighter monetary policy with high interest rates strengthens the yuan, it could moderate the effects of a decline in demand in imports, while weakening the export competitiveness of finished goods.
Easy lending conditions have in the recent past enabled speculation on commodity chemicals as well as real estate, which has helped boost Chinese polymer demand. This speculation has sometimes led to cargoes being sold at below cost, thereby keeping overall petrochemicals pricing down. Credit has also sustained consumer demand for finished products that utilise petrochemicals, as well as the housing sector, which also creates demand for home furnishings. If a tighter monetary policy with high interest rates strengthens the yuan, it could moderate the impact of a decline in demand on imports while weakening export competitiveness of finished goods
Future petrochemicals demand will be led by the transport, automotive and construction sectors, while agricultural development would increase sales of chemical fertilisers, pesticide and plastic sheeting. The key risk factors for the petrochemicals industry are high oil prices, trade liberalisation, bottlenecks in resources and requirements for sustainable development. High oil costs would impact most on the refining industry as Chinas energy supply regulations restrict refining manufacturers from passing increased crude oil costs downstream. Chinas membership of the WTO is opening up the market to foreign competition, exposing local petrochemicals producers to foreign rivals with price advantages on oil products and petrochemical products as well as quality advantages due to their possession of key technologies. Chinas dependence on imported crude is increasing, exposing the petrochemicals sector to greater external risks. China will eventually be compelled to enforce stricter regulations on sustainable development with a stress on reduced consumption, environmental pollution standards and clean production processes. This will moderate growth in the petrochemicals market and increase costs for local producers.
We see the petrochemicals market following GDP growth rates, rather than the above-trend rates seen in recent years. 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. There are concerns that the industry is growing too fast, yet lagging behind in terms of efficiency and cost competitiveness. BMI has been warning that overcapacity could become a problem in
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the short term amid a downturn in domestic demand growth, but that in the long term it will continue to see petrochemicals demand growing faster than domestic capacity expansion, requiring continued imports.
The Chinese petrochemicals industry continues to surge amid growth in capacity with BMI estimating ethylene capacity of 17.9mn tpa and polymer capacity of 43.9mn tpa in 2011, both of which have doubled over five years. 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. Added to this are a number of other proposed projects, such as Royal Dutch Shells plans to create a new petrochemicals complex at Huizhou with ethylene capacity of 1mn tpa, adding to the 1mn tpa available at the site this year. However, Sinopecs president, Wang Tianpu, has stated that overcapacity is a concern and could impact on industry profitability while access to resources remains a challenge and the company is looking overseas cooperation to access advanced resources. Sinopecs medium-term objectives include producing higher-value added products, optimise its feedstock position, develop new products and improve competitiveness in the aromatics chain. Chinas dependence on the Middle East is unlikely to diminish over the next five years, with continued requirement for imports of olefins and polymers from Gulf producers. However, increased investment in coal-to-olefins production should help mitigate the problem, although China will also remain a net importer of coal.
We expect a rationalization of the Chinese petrochemicals industry over the medium term, which will have to address the problems of overstocking, lower than expected demand growth and a drastic increase in volumes from the Middle East and new start-ups in China and Singapore. The PVC segment will be the target of rationalization, having seen producers to slash their operating rates to an average of around 50% by mid-2010 in order to reverse losses. PVC producers were reportedly considering cutting capacity by a further 10-20% due to low demand from converters as the real estate sector experienced a slowdown. This is despite the assistance of regulatory changes with energy efficiency requirements leading to a greater use of PVC in pipes, windows and doors. Overexpansion of PVC production in China in recent years has led to a market imbalance.
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Table: Chinas Petrochemicals Sector, 2007-2015 (000 tpa, unless otherwise stated)
2007 Oil production, 000 b/d Oil consumption, 000 b/d Oil imports, 000 b/d Gas production, bcm Gas consumption, bcm Gas imports, bcm Refining capacity, 000 b/d Ethylene capacity Ethylene consumption Ethylene deficit Acrylonitrilebutadiene-styrene HDPE capacity LDPE capacity LLDPE capacity PE capacity PP capacity PVC capacity PS capacity Polyolefins consumption Polymer capacity 3743.37 7771.07 4027.70 69.24 69.52 0.28 7510.74 10,160 22,100 11,940 0 0 0 0 7,080 6,850 9,800 1,440 34,617 25,170
2008 3901.00 8086.48 4185.48 80.30 81.30 1.00 7811.97 10,160 23,647 13,487 2,505 0 0 0 7,080 6,850 11,787 930 38,771 26,647
2009 3790.36 8625.21 4834.85 85.17 88.70 3.53 8635.34 11,410 24,000 12,590 2,655 2,540 2,195 3,075 7,810 8,575 16,230 1,180 39,500 33,795
2010f 3990.00 9315.00 5325.00 86.00 97.57 11.57 8795.00 16,260 26,500 10,240 3,495 3,140 2,195 4,625 9,960 10,825 18,690 1,410 43,200 40,885
2011f 4100.00 9765.00 5665.00 87.10 101.00 13.90 9045.00 17,910 27,500 9,590 3,785 3,140 2,195 5,575 10,910 11,235 20,110 1,660 48,076 43,915
2012f 4075.00 10204.43 6129.43 88.00 110.00 22.00 9345.00 21,560 29,800 8,240 4,665 3,790 2,195 6,275 12,260 12,735 20,460 1,760 52,729 47,215
2013f 4100.00 10663.62 6563.62 89.00 118.25 29.25 9595.00 22,100 31,000 8,900 4,735 4,440 2,195 6,275 12,910 13,395 20,860 1,960 57,381 49,125
2014f 3990.00 11090.17 7100.17 89.50 130.00 40.50 9895.00 24,700 33,200 8,500 4,735 4,440 2,195 6,275 12,910 13,395 21,260 1,960
2015f 3910.00 11478.33 7568.33 90.00 140.00 50.00 10145.00 25,700 35,000 9,300 5,000 4,740 2,195 6,575 13,510 13,695 21,500 1,960
49,525
50,665
f = forecast; na=not available/not applicable. Source: Oil & Gas Journal, BMI, Companies
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Macroeconomic Outlook
2011 Growth Revised From 7.5% To 8.3% BMI View: While we continue to see the Chinese economy slowing in 2011, a number of factors on the external front and the domestic policy arena suggest that the slowdown will be less pronounced than previously envisioned. We now see real GDP growth coming in at 8.3%, rather than 7.5% previously. We continue to stress that, despite headwinds from rising food price inflation, private consumption will be an outperformer in 2011 and beyond, and the service sector will also benefit disproportionately from this consumer growth.
Our view that the Chinese economy faces a property market slump and a sharp slowdown in total investment spending in 2011 remains unchanged. As we have addressed several times over recent months, investment spending growth is likely to be dragged down by a slowdown in money supply growth and the accumulation of local government liabilities, with private consumption though a bright spot unlikely to fully compensate. While this remains our base case, a number of recent developments suggest to us that real GDP growth will continue to be strong in 2011, particularly in H111, and we have upgraded our growth forecast accordingly. Owing to an improved outlook for external demand, particularly demand from the US, as well as a number of domestic factors that are likely to cushion the slowdown in investment, we now see real GDP growth coming in at 8.3%, rather than 7.5%. We stress, though, that we continue to see below-consensus growth in the absence of another stimulus package from Beijing.
Net Exports Supported By US Stimulus The recent upturn in the US economy and the further boost given to fiscal and monetary policy suggest that US growth will come in higher than previously expected in 2011, and we recently revised our real GDP growth forecast from 2.0% to 2.8%, owing largely to an improved outlook for private consumption. Our US current account forecast has also been adjusted accordingly, pencilling in stronger import growth. With 17% of Chinese exports heading to the US (China's largest export market), greater US import demand will have a direct positive impact on Chinese exports and economic growth. Furthermore, the positive knock-on effect of a more robust US recovery on the global economy will provide additional support, while the current growth momentum in Europe suggests that Chinese exports to the eurozone look set to remain strong in Q111 at least.
With the above factors in mind, we have upwardly revised our forecast for China's trade balance in 2011, projecting a more gradual pace of narrowing. The trade balance should come in at 2.7% of GDP in 2011 (down from 2.4% previously), compared with an estimated 3.4% in 2010. This translates into a net export drag of 0.3 percentage points (pp) from headline growth (unchanged from the 2010 estimates), down from 0.8pp previously, adding 0.5pp to headline growth.
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Investment Outlook Strengthened An improvement in the global economy and its positive impact on China's export outlook is also likely to have a positive impact on domestic demand unchanged. The spillover effects of an increase in export demand on investment, particularly in the coastal provinces, has to be taken into account and we expect to see a slightly better performance in gross fixed capital formation (GFCF) as a result. We now see GFCF expanding by 8.7% in 2011, up from an expectation of 8.0% previously. There are also other factors that suggest domestic demand growth could hold up better than previously expected this year, notwithstanding the headwinds of tighter monetary policy.
New Loan Target Not As Restrictive As Expected The 2011 new loan target has been set at CNY7.5trn (US$1.13trn), which is slightly higher than we and most other observers were expecting. Monetary conditions will undoubtedly be tighter in China this year than in 2010, owing partially to base effects (see our online service, November 29 2010, 'Inflation Concerns To Subside By Mid-2011'). Indeed, while the new loan target will be the same as last year's target, the actual growth rate of total credit should come in at roughly 16.0% versus an estimated 21.3% in 2010. Furthermore, a crackdown on shadow banking sector lending, which is estimated to have resulted in over CNY1.0trn in additional credit into the economy in 2010, is likely to further reduce money supply growth. Two more 25-basis point interest rate hikes we have pencilled in for H111 will also serve to restrict liquidity. That said, we had factored in a more aggressive slowdown in bank lending in 2011 than the government appears willing to tolerate, and so this should act as less of a drag on growth, particularly in the area of local government-driven construction spending.
Housing, Inland Development Add Support Back in Q310, we highlighted the upside risks that a rise in social housing investment could place on total investment spending (see 'Social Housing To Provide Limited Support To Growth', August 27). The recently-announced ambitious target of 10mn units for 2011, versus 5.8mn in 2010, will add significantly to overall investment spending, helping to counterbalance some of the expected slowdown in the private market, despite it representing less than one-tenth of total real estate investment.
Another factor behind our decision to nudge up our GFCF forecast is the recent indication from Beijing that infrastructure investment is unlikely to be compromised in 2011. The government recently announced that, despite moving towards a more 'prudent' monetary policy stance, it would maintain an 'active' fiscal policy stance in 2011. Several large infrastructure developments in China's central and western provinces are likely to provide significant support to growth as the country's traditional growth drivers underperform in 2011. H111, in particular, could see strong growth in local infrastructure spending as local governments seek to start new projects to ensure a large share of the fiscal and monetary resource allocation in the 12th Five-Year Plan. A repeat of the infrastructure surge seen in 2009 and 2010 seems highly unlikely, but we acknowledge that it is looking increasingly likely that a sharp slowdown will not be tolerated by Beijing.
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Power Cuts To Come To An End Another supportive factor that should provide a boost to industrial production is the easing of mandatory energy cuts, which were recently implemented as a way of meeting environmental targets. The government announced in December that success had been achieved on energy intensity targets, suggesting that power cuts will see an ease going forward. The absence of such forced power cuts, which negatively impacted heavy industry such as coal and steel production, will also provide a slight boost to exports in 2011.
Private Consumption Forecast Remains Unchanged Despite Declining Confidence Our private consumption growth forecast remains unchanged at 9.0%, which pencils in an improvement from an expected 8.5% growth in 2010. Rising real wages and continued subsidies on consumer durable goods purchases should see private consumption begin its long-term trend of outperformance in 2011, and we believe that recent increases in food price inflation will not derail this development. On the one hand, rising inflation expectations have begun to hit consumer confidence levels (see chart) and a continued increase in food price inflation would do further damage on this front. On the other hand, the proposed resource pricing reform, which sought to hike prices of oil, gas, water, coal and public transport, will likely be delayed or at least moderated, owing to the rise in inflation.
2012 Outlook Takes A Hit While we have upgraded our 2011 real GDP growth forecast, we have downgraded our 2012 forecast from 8.5% to 8.1%. Indeed, as we have argued since the onset of China's fiscal and monetary stimulus drive, some form of payback from excessive credit growth will be unavoidable. With the government looking likely to persist with its expansionary fiscal policy and maintain a moderately loose monetary policy, the payback is likely to come in the latter stages of 2011 and 2012, in our view.
Services To Outperform In Line With Private Consumption With private consumption's share of GDP set to steadily rise from an all-time low of 35.2% in 2010 to 35.4% in 2011 and increase further over the coming years, the services sector should benefit disproportionately. China's service sector is underdeveloped compared with countries with a similar GDP per capita level, representing just 44% of GDP versus an average of 55% for similarly developed countries. This is more than likely down to the government's centrally planned policies, which have channelled resources into manufacturing and squeezed private consumption's share of GDP. The government has recognised the need to boost the service sector as a means of rebalancing the economy and recently stated that it would aggressively promote service consumption. We expect the government to give priority to the services sector in the 12th Five-Year Plan, with a reduction in taxes on the industry, government investments in service sector infrastructure, favourable financing policies and subsidies for research and development. Telecoms, leisure & tourism and business services are key industries that could outperform over the medium term.
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Table: China Economic Activity; 2006-2015
2006 Nominal GDP, CNYbn 1 Nominal GDP, US$bn 1 Real GDP growth, % change y-o-y 1 GDP per capita, US$ 1 Population, mn Industrial production index, % y-o-y, ave 1 Unemployment, % of labour force, eop 3
2
2007 25,730.6 3,384.6
2008 30,067.0 4,328.8
2009 32,466.1 4,753.8
2010e 36,972.6 5,445.2
2011f 41,765.8 6,373.3
2012f 46,616.8 7,244.6
2013f 51,659.2 8,213.1
2014f 56,937.1 9,284.3
2015f 62,704.8 10,487.0
21,192.4 2,658.9
11.6 2,028 1,311.0
13.0 2,568 1,317.9
9.0 3,268 1,324.7
8.7 3,617 1,331.4
10.2 4,177 1,338.2
8.3 4,861 1,345.8
8.1 5,494 1,353.4
7.6 6,194 1,361.0
7.0 6,964 1,368.5
7.0 7,824 1,375.9
16.4
18.0
12.9
9.4
9.5
8.0
9.0
9.5
8.5
8.0
4.1
4.0
4.2
4.8
4.4
4.4
4.3
4.2
4.2
4.1
Notes: BMI estimates. BMI forecasts. Sources: National Bureau of Statistics, BMI; World Bank/BMI; National Bureau of Statistics
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Company Profiles
China Petroleum & Chemical Corporation (Sinopec)
Strengths Leading refining and distribution position. Substantial petrochemicals portfolio. Rising oil production. Joint retail and petrochemicals ventures with IOCs. Growing international portfolio. Weaknesses Mature producing asset base. Cost and efficiency disadvantages. Relatively weak upstream oil position. Opportunities Huge cost-cutting potential. Strong domestic energy demand growth. Threats Rising investment requirement. Changes in national energy policy.
Company Overview
Sinopec is an integrated energy and chemicals company with upstream, midstream and downstream operations. Based on 2004 turnover, it is the largest listed company in China and the second largest crude oil and gas producer, as well as the largest supplier of major petrochemicals products (including intermediates, synthetic resin, synthetic fibre, synthetic rubber and fertilisers). Sinopec Corp is 55.06% owned by the state-owned China Petrochemical Corporation (Sinopec Group). The company is the largest retail marketer of oil products, with around 29,400 retail outlets, equal to a two-thirds share of the domestic fuels market. It also has the biggest refining presence and is in the midst of a major overhaul of its refineries, closing a number of smaller facilities and expanding others. The Chinese major is also the largest domestic producer of petrochemicals and has established major JVs with BP, ExxonMobil and BASF. Around 70% of Sinopecs crude supplies are imported or purchased from local rivals PetroChina and CNOOC, leaving the company highly dependent on outside imports
Strategy
Key domestic projects include the multi-billion-dollar Xihu Trough project, involving the development and marketing of oil and gas reserves in the East China Sea. The project is being developed by CNOOC and Sinopec after Unocal and Shell pulled out for commercial reasons. Gas from the fields will be transmitted by pipeline to customers along the eastern coast. Sinopec and BP formed the BP Yangtze Petrochemical Acetyl Company in November 2005 in the east China city of Nanjing, building upon an initial agreement reached in May 2004 during Chinese Premier Wen Jiabaos visit to the UK. The JV will build an acetic acid plant with an annual production capacity of 500,000 tonnes.
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Construction of the US$3.5bn Fujian Refinery, a JV between Sinopec (50%), Middle East hydrocarbons producer Saudi Arabian Oil (25%) and US oil major ExxonMobil (25%) began in July 2005. The facility will include a 240,000b/d refinery, an 800,000tpa ethylene steam cracker with PE and PP units, chemical derivatives manufacturing units and related distribution and marketing facilities. ExxonMobil and Sinopecs fuels marketing JV in Fujian would then market the refinerys products. Sinopec is to spend US$2.72bn building an ethylene plant five times the size of its existing facility in the northern Chinese city of Tianjin after receiving approval from the NDRC in January 2006. The plans include expanding its existing Tianjin refinery to handle 250,000b/d. A month earlier the firm announced a venture with Shanghai Chemical Industry Park to jointly build a 200,000b/d refinery and petrochemicals facility, with investment in the project set to reach US$4.9bn.
Subsidiaries And Operating Units
The firm has more than 80 wholly and non-wholly owned subsidiaries, with 10 major petrochemicals units, including those detailed below. Sinopec Beijing Yanhua Company, which is 70% owned by Sinopec, was founded on April 23 1997 and consists of the chemical plants No. 1, 2 and 3, a synthetic rubber plant, polyester plant and the Resin Application Research Institute, which originally belonged to Beijing Yanshan Petrochemicals Corp. The core business of the company includes production and sales of the three categories of petrochemicals products: resins and plastics, synthetic rubber and basic organic chemicals. The main production facilities include a 710,000tpa ethylene unit, a 180,000tpa LDPE unit, a 200,000tpa LDPE unit, a 140,000tpa HDPE unit, an 80,000tpa EO/EG unit, a 120,000tpa benzene unit, an 80,000tpa styrene unit, a 50,000tpa PS unit, PP units (three sets, with capacities of 115,000tpa, 40,000tpa and 200,000tpa respectively), a 120,000tpa cispolybutadiene rubber unit, a 30,000tpa butyl rubber unit, two sets of 80,000tpa phenol and acetone units, a 27,000tpa mixed xylene unit, a 36,000tpa purified isophthalic acid (PIA) unit, a PET unit and a 10,000tpa high-viscosity PET (HVPET) unit. The firm is the countrys largest producer of LDPE, HDPE, PP, cis-polybutadiene rubber, phenol and acetone in terms of domestic market share. SPC is a wholly controlled subsidiary of Sinopec Corp, which owns 55.56% of SPCs shares and produces over 60 different types of products in four main categories petroleum products, intermediate petrochemicals raw materials, synthetic resins and plastic products, synthetic fibre raw materials and synthetic fibres. The firm has an ethylene production capacity of 550,000tpa, a petroleum products and petrochemicals production capacity of 3mn tpa, a synthetic fibre raw materials and polymers production capacity of 760,000tpa, a synthetic fibre production capacity of 340,000tpa and a synthetic resins production capacity of 500,000tpa. Sinopec Yangzi Petrochemicals is 85% owned by Sinopec Corp and has 36 main petrochemicals plants. In addition to an 8mn tpa refinery, the firm has an 850,000tpa ethylene plant (expanded in 2002 and again in 2004), a 260,000tpa EG plant, a 370,000tpa HDPE plant (using technology licensed from Mitsui), a 400,000tpa PP plant (also using Mitsui technology) and an 85,000tpa acetic acid plant. The firm aims to raise ethylene capacity to 1mn tpa by 2010. Sinopec Qilu Petrochemicals is 82% owned by Sinopec Corp and operates over 20 plants. Its ethylene capacity stands at 720,000tpa. Other major products include HDPE (140,000tpa),
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LLDPE (60,000tpa, doubling to 120,000tpa on completion of the expansion programme), LDPE (140,000tpa), styrene (60,000tpa, rising to 200,000tpa), PS (36,000tpa), PP (70,000tpa), VCM (234,000tpa, rising to 610,000tpa) and PVC (230,000tpa, rising to 600,000tpa). Sinopec Yizheng Chemical Fibre is located in Yizheng City in Jiangsu province and is 42% owned by Sinopec Corp, with shares trading on the Hong Kong and Shanghai Stock Exchanges. It is the largest modernised manufacturer of chemical fibres in China. Sinopec Wuhan Phoenix operates a residue fluid catalytic cracking unit, with an annual capacity of 600,000tpa, and a 70,000tpa PP unit. The firm is located in Wuhan and is 41% owned by Sinopec Corp, with shares traded on the Shenzen stock exchange. Sinopec Maoming Refining and Chemical is 99.81% owned by Sinopec. Sinopec is spending CNY4.4bn (US$531.6mn) to expand Maomings ethylene capacity at its Guangdong petrochemicals complex, raising ethylene cracking capacity to 1mn tpa from the current 386,000tpa. The expansion involves the building of one ethylene cracker and two downstream petrochemicals units, as well as the revamp of seven other related facilities.
Financial Results
In 2009, Sinopecs revenues fell 6.87% y-o-y from CNY1.44trn in 2008 to CNY1.35trn, though the company grew net income 115.47% y-o-y from CNY28.45bn to CNY61.29bn.
Key Statistics
Revenue CNY1,345.1bn (2009) CNY1,444.3bn (2008) CNY1,204,8bn (2007) CNY1,076.4bn (2006) CNY832.7bn (2005) CNY619.9bn (2004) Operating profit (loss): CNY80.2bn (2009) (CNY28.8bn) (2008) CNY78.7bn (2007) CNY83.8bn (2006) CNY68.2bn (2005) CNY62.9bn (2004) No of employees: 410,000 Year established: 2000
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Company Address
China Petroleum & Chemical Corporation (Sinopec Corp) A6 Huixindong Street Chaoyang District Beijing 100029 China Tel: +86 (10) 6499 0060 Fax: +86 (10) 6499 0489 www.sinopec.com
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Glossary Of Terms
Table: Glossary Of Petrochemicals Terms
ABS AN AS bbl bcm b/d BR btu DMT EB EDC EG EO GTL HDPE IOC JV LAB LDPE LLDPE LNG MEG
acrylonitrile-butadiene-styrene acrylonitrile acrylonitrile styrene barrel billion cubic metres barrels per day butadiene rubber British thermal units dimethyl terephthalate ethylbenzene ethylene dichloride ethylene glycol ethylene oxide gas-to-liquids high density polyethylene international oil company Joint venture linear alkylbenzene low density polyethylene linear low density polyethylene liquefied natural gas mono-ethylene glycol
MTBE NOC OX PE PET PG PO PP PS PTA PU PVC PX q-o-q SBR SM TDI tpa VAM VCM y-o-y
methyl tertiary butyl ether national oil company orthoxylene polyethylene polyethylene terephthalate propylene glycol propylene oxide polypropylene polystyrene purified terephthalic acid polyurethane polyvinyl chloride paraxylene quarter-on-quarter styrene butadiene rubber styrene monomer toluene diisocyanate tonnes per annum vinyl acetate monomer vinyl chloride monomer year-on-year
Source: BMI
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BMI Methodology
How We Generate Our Industry Forecasts
BMIs industry forecasts are generated using the best-practice techniques of time-series modelling. The precise form of time-series model we use varies from industry to industry, in each case being determined, as per standard practice, by the prevailing features of the industry data being examined. For example, data for some industries may be particularly prone to seasonality, meaning seasonal trends. In other industries, there may be pronounced non-linearity, whereby large recessions, for example, may occur more frequently than cyclical booms.
Our approach varies from industry to industry. Common to our analysis of every industry, however, is the use of vector autoregressions. Vector autoregressions allow us to forecast a variable using more than the variables own history as explanatory information. For example, when forecasting oil prices, we can include information about oil consumption, supply and capacity.
When forecasting for some of our industry sub-component variables, however, using a variables own history is often the most desirable method of analysis. Such single-variable analysis is called univariate modelling. We use the most common and versatile form of univariate models: the autoregressive moving average model (ARMA). In some cases, ARMA techniques are inappropriate because there is insufficient historic data or data quality is poor. In such cases, we use either traditional decomposition methods or smoothing methods as a basis for analysis and forecasting.
It must be remembered that human intervention plays a necessary and desirable part of all our industry forecasting techniques. Intimate knowledge of the data and industry ensures we spot structural breaks, anomalous data, turning points and seasonal features where a purely mechanical forecasting process would not.
Chemicals And Petrochemicals Industry

Plant Capacity The ability of a country to produce basic chemical products depends on domestic plant capacity. The number and size of ethylene crackers determines both a countrys likely output, and also its relative efficiency as a producer. We therefore examine:
Stated year-end capacity for key petrochemicals products, mainly ethylene, but also propylene, polypropylene, polyethylene and so forth. Government, company and third-party sources are used;
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Specific company and/or government capacity expansion projects aimed at increasing the number and/or size of crackers and downstream processing facilities.
Chemicals Supply A mixture of methods is used to generate supply forecasts, applied as appropriate to each individual country:
Basic plant capacity and historic utilisation rates. Unless a company imports chemicals products for domestic re-sale, supply is expected to be governed by production capacity;
Underlying economic growth trends. The chemicals industry is highly cyclical. Strong domestic or regional demand should be met by increased supply and higher plant utilisation rates;
Third-party projections from national and international industry trade associations.
Chemicals Demand Various methods are used to generate demand forecasts, applied as appropriate to each individual country:
Underlying economic growth trends. The chemicals industry is highly cyclical. Strong domestic or regional demand is expected to require larger volumes of either domestically produced or imported olefins (ethylene, propylene), polyolefins (PE, PP) or downstream products;
Trends in end-user industries. Strong demand for motor vehicles, construction materials, packaging products and pharmaceuticals imply rising demand for basic chemicals;
Government/industry projections;
Third-party forecasts from national and international industry trade associations etc.
Cross Checks
Whenever possible, we compare government and/or third party agency projections with the reported spending and capacity expansion plans of the companies operating in each individual country. Where there are discrepancies, we use company-specific data, such as physical spending patterns ultimately determine capacity and supply capability. Similarly, we compare capacity expansion plans and demand projections to check the chemicals balance of each country. Where the data suggest imports or exports, we check that necessary capacity exists or that the required investment in infrastructure is taking place.
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Business Environment Ratings

BMIs Petrochemicals Business Environment Rating has three objectives. First, we have defined the risks rated in order to accurately capture the operational dangers to companies operating in this industry globally. Second, we have, where possible, identified objective indicators. Finally, we have used BMIs proprietary Country Risk Ratings (CRR) in a nuanced manner in order to ensure that only the aspects most relevant to the industry have been included. Overall, the ratings system which integrates with those of all industries covered by BMI offers an industry-leading insight into the prospects/risks for companies across the globe.
Conceptually, the ratings system divides into two distinct areas, with the indicators included in each area stated below:
Limits Of Potential Returns Evaluation of sectors size and growth potential in each state, and also broader industry/state characteristics that may inhibit its development.
Risks To Realisation Of Returns Evaluation of industry-specific dangers and those emanating from the states political/economic profile that call into question the likelihood of anticipated returns being realised over the assessed time period. Indicators The following indicators have been used. Overall, the rating uses three subjectively measured indicators, and 41separate indicators/datasets.
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Table: Petrochemicals Business Environment Indicators And Rationale
Limits of potential returns Market structure Cracker capacity, current year Cracker capacity, 2011 Downstream capacity, current year Country structure
Rationale
Objective measure of sector size Forecast of sector development Objective measure of domestic demand
Financial infrastructure Trade bureaucracy Physical infrastructure Risks to realisation of returns Market risk Industry regulatory environment Country risk
Rating from BMIs Country Risk Rating (CRR) to denote ease of obtaining investment finance. Poor availability of finance will hinder company operations across the economy Rating from CRR. Low trade restrictions are essential for this export-based industry Rating from CRR. Given size of manufacturing units, sector development requires strong supporting power/water/transport infrastructure
Subjective evaluation against BMI-defined criteria. This indicator evaluates predictability of operating environment
Structure of economy Long-term external economic risk Long-term external financial risk Institutions Long-term political risk
Rating from CRR, to denote health of underlying economic structure, including 7 indicators such as volatility of growth; reliance on commodity imports, reliance on single sector for exports Rating from CRR, to denote vulnerability to external shock principal cause of economic crises Rating from CRR, to denote vulnerability of currency/stability of financial sector Subjective rating from CRR, to denote strength of bureaucracy and legal framework. Also evaluates level of corruption Rating from CRR, to denote strength of political environment
Source: BMI
Weighting
Given the number of indicators/datasets used, it would be wholly inappropriate to give all subcomponents equal weight. Consequently, the following weight has been adopted.
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Table: Weighting Of Indicators
Component Limits of potential returns Petrochemicals market Country structure Risks to realisation of returns Market risk Country risk
Weighting 70%, of which 65% 35% 30%, of which 30% 70%
Source: BMI
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BMI China Petrochemicals Report Q2 2011

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CHINA PETROCHEMICALS REPORT Q2 2011

Part of BMIs Industry Survey & Forecasts Series

China Petrochemicals Report Q2 2011

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

Global Overview ............................................................................................................................................. 11

Emerging Asia Petrochemicals Overview ................................................................................................... 21

China Market Overview .................................................................................................................................. 24

Industry Trends And Developments ............................................................................................................ 37

Business Environment .................................................................................................................................. 54

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

Foreign Trade Regime ......................................................................................................................................................................................... 57

Industry Forecast Scenario ........................................................................................................................... 59

Company Profiles ........................................................................................................................................... 67

Glossary Of Terms ......................................................................................................................................... 71

BMI Methodology ........................................................................................................................................... 72

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

China Political SWOT

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

China Economic SWOT

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

China Business Environment SWOT

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

e/f = estimate/forecast. Source: BMI

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

Ethylene Capacities By Region 2009 Estimate

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

Ethylene Capacities By Region 2014 Forecast

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

Business Monitor International Ltd

China Petrochemicals Report Q2 2011

Global Oil Products Price Outlook

Table: Oil Product Price Assumptions, Q410-Q411 (US$/bbl)

Q410 94.61 94.65 95 94.75

Q111e 97.89 96.79 98.75 97.81

Q211f 89.69 87.63 87.95 88.42

Q311f 86.06 84.47 84.25 84.93

Q411f 94.14 94.18 94.53 94.28

99.72 99.97 98.57 99.42

97.68 99.16 96.46 97.76

91.35 90.89 90.35 90.87

90.2 90.38 88.61 89.73

99.23 99.47 98.08 98.93

97.45 97.46 97.33 97.41

95.04 95.19 96.27 95.5

89.56 89.77 89.94 89.76