Growing demand for petrochemicals in China creates opportunities for JVs with US and European companies

13-Feb-12

China has surpassed North America and Europe as the largest consumer of petrochemicals in the world, creating opportunities for joint ventures with US and European companies, a report by GlobalData has found. China has established itself as the frontrunner in the global petrochemicals market, largely due to impressive demand from its large population. The demand for basic petrochemicals and major plastics increased by almost 300% between 2000 and 2010, and is further expected to increase by another 90 mln tpa by 2015. The greatest increase in demand has been for basic petrochemicals and major plastics such as ethylene, propylene, butadiene, benzene, toluene, xylenes, methanol, polyethylene, polypropylene, PVC, polystyrene, expandable polystyrene, acrylonitrile butadiene styrene and polyethylene terephthalate resin. A focus on scale economy and expansion has aided the growth of the petrochemicals industry in China, with producers looking to diversify their product portfolios and reach other demand-rich regions. Government schemes focusing on industrialization and urbanization have also helped, particularly as markets in developed regions such as North America and Europe are struggling due to saturation and a slow recovery from the financial crisis. China has tried to increase its production capacity to match growing demand, but, despite a substantial increase, production growth is falling behind demand growth, necessitating the construction of more petrochemical plants. Companies from other regions are therefore using this opportunity to build presence in region, particularly through the establishment of joint ventures with national companies. As a result, the number of joint ventures involving companies based in China has shot up, with firms seeking a competitive advantage in a tough financial climate racing to gain presence in the fast-growing Asian markets. Producers with operations in Asian markets also benefit from abundant and cheaper natural gas reserves, which help to increase profitability. In return, Chinese national companies often benefit from being able to share more advanced technologies with their joint venture partner, as most of the latest technologies for petrochemicals production are developed by European and US companies.