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Recently Released Market Study: China Petrochemicals Report Q2 2014

New Energy research report from Business Monitor International is now available from Fast Market Research

 

Boston, MA -- (ReleaseWire) -- 04/14/2014 -- The Chinese petrochemicals industry is set for solid growth in output, but this will be constrained by a slower pace of domestic demand for goods. BMI's latest China Petrochemicals Report predicts exports will take the lead, although some segments will continue to suffer over-capacity and downstream operations are set to see some closures to adjust supply to demand.

The development of shale gas resources could enable China to develop low-cost ethane production, answering the challenge of new shale gas-based petrochemicals facilities in the US. US polymer output is set to flood the Asian markets over coming years, driving down prices. The ability to match the US on price will be crucial to ongoing growth.

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BMI estimates that Chinese petrochemicals output grew by around 12% in 2013 with ethylene output up by around 7% and primary plastics also up by 7%, while plastic products grew 3%. Growth in ethylene output came after a dismal performance in 2012, when production fell by just over 2% to under 15mn tonnes, in spite of 20% growth in cracker capacity to 21.56mn tonnes. Among expansions in 2013 were Sinopec's Wuhan Petrochemicals' new 800,000tpa ethylene cracker with downstream capacities of 280,000tpa mono-ethylene glycol (MEG), 600,000tpa PE and 400,000tpa PP facility. In addition to Wuhan, Sichuan Petrochemical opened new plants in July. This has raised fears that an increase in supply could weigh on polymer prices.

BMI has updated the following forecasts/views:

- China may need to export a significant amount of polymer to justify growth in capacity. Polymer production trends are strongly correlated with the performance of the export sector, which covers a wide range of manufacturing sectors. China's exports are recovering and are likely to remain relatively strong as we enter 2014. However, beyond this cyclical upswing, the stronger yuan is likely to begin to bite, and we are forecasting exports to grow by just 8.0% in 2014 in nominal terms, from an estimated 8.3% in 2013.
- We continue to hold the view that the recovery in China's construction activity in 2013 will not be sustainable in 2014 - we forecast construction real growth falling from 6.6% in 2013 to 5.1% in 2014. Given government plans to reduce capacity in China's PVC feedstock sector, which will help reduce surplus capacity, the slowdown may not have a major impact on PVC prices.
- Growth in demand for synthetic rubber and engineering plastics in the automotive industry is set to cool slightly. China's attractiveness as a manufacturing and export hub, on the back of cheap labour, is diminishing. Our long-term auto production forecasts take that into account and we see them growing in line with our auto sales forecasts, mostly to satisfy domestic demand. Nevertheless, by 2018, automotive production should be around 45% higher than in 2012, providing a strong base for consumption of synthetic rubber and engineering plastics.

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