Yanhua cracker could be catalyst for Sinopec

14 November 2005 00:01  [Source: ICB Americas]

BEIJING YANHUA Petrochemical’s decision to opt for a new cracker rather than an expansion of its existing cracker could spark a similar move by other Sinopec subsidiaries.

Yanhua decided late last month to seek Sinopec’s approval for a new 600,000 metric-ton-per-year cracker at Yanhua, near Beijing, in China, instead of proceeding with a previous plan to expand its 700,000 ton cracker, at the same site, to 1.2 million tons.

A feasibility study and environmental impact assessment study has been submitted to Sinopec and the central government. The project includes new derivatives units and expansions of existing plants.

“You can call the cracker a new unit, but as it is being built at the existing site, the cracker will share utilities. So I would term it as a third round of expansion by Yanhua,” said a China-based analyst.

Yanhua’s cracker had an original capacity of 300,000 tons. It was first expanded to 450,000 tons in September 1994 and then to 700,000 tons in late 2001.

The analyst pointed out that Yanhua had always been the first among Sinopec subsidiaries to expand capacities. “If Yanhua succeeds, others will follow. For instance, Qilu Petrochemical, Yangzi Petrochemical and Maoming Petrochemical have expanded their crackers after Yanhua,” he noted.

Yangzi expanded its cracker in 2002, raising the capacity from 450,000 tons to 650,000 tons while Qilu raised its cracking capacity to 720,000 tons from 450,000 tons in 2004.

And Yangzi has already stated its interest in building a new 600,000 ton cracker instead of a 250,000 ton expansion of the existing unit.

Meanwhile, Yanhua’s location in northern China raises questions on the viability of the project, as the bigger markets for olefin derivatives are in the southern and eastern areas.

The industry analyst observed that many of the projects in China are led by political considerations rather than economic feasibility.

By: Malini Hariharan
+65 6780 4359

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