China led global growth in chemicals demand in the past two years, raising the price of oil and prompting buyers to stockpile in case of a shortage. Capacity expansions at refiners like China Petroleum & Chemical have eased supply concerns, prompting buyers to prune back inventories. Demand for ethylene however, has not shown a major slowdown. Once inventory de-stocking is complete, demand could make a come back, posing pressure on supplies. Chinese demand for ethylene is expected to recover in the third or fourth quarter on account of depleted inventories along with booming economic growth.
In 2004, China produced 6.27 million tons of ethylene and imported almost 46,000 tons as per government data. New plants will increase China's output of ethylene by 22% annually decade. Shanghai Secco Petrochemical, a US$2.7 billion joint venture between BP and China Petroleum & Chemical (Sinopec) commenced operations recently at a plant with a capacity of 900,000 tpa of ethylene. A 600,000 tpa joint-venture plant between BASF and Sinopec is scheduled to commence in June. Production from two Chinese plants, scheduled to come onstream this year, could cause a glut of ethylene in China.
Petrochemical prices are lower this year than the peaks reached in 2004. Volumes disappoint in 2005 amid what appears to a major de-stocking in China. Ethylene prices dropped 52% to US$600/ton as of May-end, after reaching a record US$1,270/ton on Sept. 10.
02-Jun-05 
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