The decline in the value of the yuan, as well as market tightening in some segments, has benefited the Chinese petrochemicals industry, which has struggled with competitiveness. The result of rising domestic production will be a cut in imports and, in segments such as polyvinyl chloride (PVC) where China produces a surplus, rising basic polymers exports. ...Plastic product volumes grew -.- y-o-y to --.-mn tonnes. Although petrochemicals output is rising, capacity utilisation for coal-based polyethylene producers was estimated at ----- in ----, down from over -- in ----, while China s polypropylene (PP) operating rate was around -- due to tighter supplies. China s Petrochemicals Risk/Reward Index (RRI) score declined by -.- points amid a decline in country risk ratings. ...We forecast China s construction sector to grow by an annual average of -.- between ---- and ---- in real terms, a significant slowdown from the --.- registered between ---- and ----. This will depress demand growth for a range of polymers used in the construction market, particularly PVC and polymer piping.
...Potential restructuring could see petrochemicals operations spun off from the country s large oil companies, potentially leading to divestment in the long-term and greater commercial flexibility. Paraxylene will remain a segment where supply has failed to keep up with demand from the rapidly growth polyester sector. � Industrial reform has led to consolidation within the sector and greater willingness to enter into JVs with foreign firms. China badly needs foreign petrochemicals technology and is actively encouraging foreign joint ventures (JVs) with state-owned enterprises; in return, China offers foreign companies a growing domestic market for their products, and low construction and labour costs when building greenfield projects. � World Trade Organisation (WTO) accession puts pressure on China to open-up markets and encourage greater participation in the petrochemicals sector. ...� Fuel pricing reforms could improve the fiscal position of the country s downstream companies, such as Sinopec, thereby freeing up investment for the petrochemicals sector. � A push to tap China s shale gas potential could provide cheaper and more abundant feedstock over the long term.
...Some segments, particularly in PET, are highly over-supplied, with Chinese producers struggling to sustain margins. Many small-scale Chinese petrochemicals firms are burdened by low levels of efficiency and poor economies of scale. ...
