Soaring naphtha prices and fierce market competition have resulted in expected loss for Sinopec Corp in its August chemical production, after reporting huge refining losses. Prices of naphtha, a key feedstock in ethylene production, more than doubled from the start of the year to more than US$1200/MT, while increases in ethylene prices could not cover the higher costs. This aggravate the company's situation as its refining business was losing money because of a state-set fuel price and higher world crude prices. Nearly 80% of the crude refined by Sinopec in the January to June period was imported. Sinopec is expected to lose over US$200/ton of imported crude oil it refined, even when the world crude price stood at 115 U.S. dollars per barrel. The government will continue to provide subsidies to the company in the next quarter, but it could decrease the amount because of falling world crude prices and an increase in domestic refined oil prices since June 20.
Central finance has started a subsidy to Sinopec Corp and PetroChina Company Limited to compensate for losses arising from the imported crude oil processing and to refund the value-added tax imposed on refined oil imports of the two giants.
02-Sep-08 
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