Scope of development of petrochemical sector in China:

1. China's growing domestic consumption will continue to drive the strong development of petrochemical industry in the next five to ten years.

2. China's government support to build own petrochemical plants, as they could not wants to rely on the imports for a long time.

3. In the recession period China's demand almost single-handedly buoyed up petrochemical prices in Asia when the rest of the world was reeling from an economic slump.

4. There are major petrochemical giants are available such as PetroChina and Sinopec, can do investment of billions of Yuan to accomplishment of satiating the countrys strong enthusiasm for petrochemicals.

5. Wison is a Shanghai-based company that provides engineering, procurement and construction (EPC) services, as well as commissioning services for refinery, petrochemical and other industrial projects. Wison has intentions to tender for a number of petrochemical projects in China, including the building of BASFs Chongqing crude methylene di-p-phenylene isocyanate (MDI) projects and the construction of a 1m tonne/year cracker of state-owned oil major China National Offshore Corp (CNOOC) in Huizhou.

Being the third largest economy, China still depends onimports for roughly half of its total requirement for the petrochemicalproducts like ethylene and propylene. To speed up its plan and to becomeself-sufficient China Government has implemented motivation plan, which leadsto the de-bottlenecking of the petrochemical industry, also acceleratesexpansion of the domestic refinery and cracker. China needs to build largescale refineries and crackers even under the negative assumption that industrydownstream from ethylene would not manage growth in next coming year.

China's cracker capacity accessed around 9.78 m ton/year in 2006, whichremain unchanged till year 2009. The motivation plan has aroused extensiveoversupply concerns at domestic and export when set against the background ofthe global economic collapse.

For supporting the government motivation plan, chinasindustrialist announced the expansion project of 4.55 m ton in 2009 and 1.40 mton in 2010, with these projects the chinas ethylene capacity reached to 14.33m ton/year in 2009 and 15.73 m ton/year in 2010, which included projects ofSinopec and Petro which were postpone due to shrinking demand and failingprofits in 2008.

Impact of Expansion project

Early in 2008, china imported around 40 percent ofpolyethylene, 74 percent of Mono ethylene glycol and 53 percent of styrene,Imports reduces to 5 percent, 58 percent and 13 percent respectively in year2010. Cracker expansion helps to reduce the dependency on imports for theethylene downstream products.

Trend of China's cracker expansion project

Forecasts of China's ethylene demand (kt)

Reference: S/Z Intelligence