China's ethylene industry investments getting overheated?

01-Sep-05

Currently, China has 20 ethylene installations, with a total production capacity of 7.2 million tons. 5 more projects, each with a capacity of at least 600,000 tons are in the pipeline. Several petrochemical and ethylene plants are planning capacity expansions. At this rate, China's ethylene production capacity could reach 10 million tons by 2010. To compound the situation, DNOOC and Sinopec are planning a new round of ethylene project construction in Tianjin, Chengdu, Chongqing, Wuhan, Guangzhou, Dalian and Shanghai, each with an at least annual capacity of 800,000 tons. If these projects are approved, the country's ethylene production capacity could cross 20 million tons in the next few years. China's dispersed ethylene industry seems to indicate signs of overheating in investment. The scale and distribution of the plants are irrational, and could increase investment costs. The most feasible and economical size of plants in China is 800,000-1.3 million tons. The smaller sized plants could lead to problems of economies of scale. The eastern part of the country seems to be ideal for new ethylene projects as the Daya Bay area is near the mouth of the Zhujaing River, Meizhou Bay area and the Bohai-rim area. The geographical spread indicates that no new projects are planned for western China. With high transportation costs, this lop sided development of the Eastern region could add to the raw material costs. The excessive capacity expansions could bring in many problems with oil source and downstream market.