China's growing ethylene production unlikely to lower reliance on imports

27-Nov-06

In 2005, China used 18.76 million metric tons of ethylene but local production capacity of 8.44 million tons left it with a deficit, filled by imports, of 55% of its needs. Two large ethylene facilities came on stream in China in the past two months, boosting annual capacity by 1.1 million tons, or 13%. China Petroleum & Chemical Corp. (Sinopec Corp.), the country's largest refiner by capacity, commenced production of an ethylene plant with an annual capacity of 1 million tons. PetroChina Co. started operations at its 700,000 ton ethylene facility in northwestern China. Though China has boosted domestic output of ethylene, strong domestic demand, mostly from the chemicals and packaging sectors, is unlikely to reduce China's reliance on imports. China's ethylene demand may reach 27 million tons in 2010 and 37 million tons in 2015. Construction of more ethylene units by state companies is underway, with production capacity estimated to grow by 10% annually. The problem is that China's demand for ethylene is growing at just as fast a rate, meaning the shortfall will persist. Foreign and domestic private companies wanting to invest in China's ethylene market are facing obstacles from Chinese government restrictions aimed at defending the interests of state-run oil companies. Keeping in mind the estimated increase in demand for ethylene, PetroChina is constructing ethylene facilities in Fushun in northeastern Liaoning province, Chengdu in southwestern Sichuan province and Dushanzi in northwestern Xinjiang region. In early November, Sinopec started building a 1-million-ton ethylene facility at its Zhenhai refinery in the eastern province of Zhejiang, with construction expected to be completed by 2009.