Boston, MA -- (SBWIRE) -- 07/02/2012 -- BMI's China Petrochemicals Report Q312 examines the long-term growth trends that are in play across the local industry, but warns of short-term concerns about over-capacity and the impact on prices and trade.
This report analyses the way in which the slowdown in Chinese construction activity is affecting polymer demand and explores how this could influence investment risk. It also examines the performance of leading operators and their risk management and growth strategies.
In Q112, the Chinese petrochemicals industry expanded at a much slower pace than in previous quarters, due to the economic slowdown. Ethylene output fell 0.6% year-on-year (y-o-y) to 3.9mn tonnes, despite ethylene cracker capacity increasing by more than 20% over the previous year. The deteriorating performance in ethylene indicated a slowdown in feedstock demand from petrochemicals producers and plastic converters as they sought to clear inventories amid deteriorating conditions, although end-use output appeared to hold its ground. Several large new Polyethylene terephthalate (PET) plants were set to come online in Q212, adding 1.7mn tonnes per annum (tpa) of capacity and bringing total PET capacity to around 6.5mn tpa. China is also adding 900,000tpa of polypropylene (PP) capacity in 2012.
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Chinese polymer demand has slowed considerably due to the weakness in the construction sector and slower economic growth. The segment that will be affected most over the short term will be polyvinyl chloride (PVC) and sales could fall by at least 20% in 2012. With consumption growth now slowing and falling below the high double-digit rates reported in previous years, there is a very real danger that continued capacity expansion will undermine Chinese petrochemicals margins, depress global prices and potentially lead to an array of anti-dumping measures against China.
BMI has revised the following forecasts/views:
- Chinese chemicals growth in 2012 will be slower than in 2011 and will remain above the GDP growth rate. However, there are significant downside risks, such as the impact of the European debt crisis and an associated downturn in Chinese exports, a situation that is unlikely to improve over 2012.
- In BMI's Asia Petrochemicals Risk/Reward Ratings (RRRs) matrix, China scores 80.3 points. This earns the country first place in BMI's regional rankings, 1.0 point ahead of Japan.
- BMI forecasts that China will have ethylene capacity of 21.56mn tpa by the end of 2012. This will then increase to 31.7mn tpa by 2016, a rise of over 75% on 2011. This includes 5.6mn tpa based on coal-to-olefins processes at 10 projects, which are either under construction or being planned. Six conventional integrated petrochemicals complexes will add a further 4.6mn tpa by 2015. A further 5.75mn tpa will be available once other projects are completed in 2016.
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