Is the Chinese petrochem industry headed for consolidation?

19-May-05

China's petrochemical industry, abundant with a large number of small plants for various products, is plagued with problems of competitiveness in a global scenario. Cracker capacities are smaller than the current world-scale size of in excess of 1million tpa. Of the 18 ethylene producers with a total capacity of 6.188 million tpa, only 7 produce in excess of 300,000 tpa. Besides, the newer crackers scheduled to come onstream this year also have low capacities. The Yangzi-BASF cracker at Nanjing, has a capacity of 600,000 tpa. The CNOOC Shell cracker at Guangdong, has a capacity of 800,000 tpa and the Shanghai Secco cracker at Caojing has a capacity of 900,000 tpa. Current PVC production in China of 5.755 million tpa in 2004, is from 82 PVC plants, of which only 18 plants have a capacity in excess of 300,000 tpa. The 200 odd methanol plants in China produce only 2.5 million tpa in all. This clearly indicates the inefficiencies in production in the Chinese petrochem industry. Along with low output, the plants are plagued with problems of outdated technologies and processes, and very highly labour dependency along with poor management. The solution lies in consolidation. In order to become efficient and globally competitive in the coming years, the industry needs to undergo consolidation. Smaller inefficient plants should be shut down and replaced by bigger, more productive plants.