20 February 2009 09:28 [Source: ICIS news]
By Judith Wang
SHANGHAI (ICIS news)--China would be pouring funds to fast track the construction of major petrochemical projects in the country under its newly-approved stimulus package for the energy sector, but there are concerns this move could create near-term overcapacity, industry sources and analysts said on Friday.
Chinese state media had earlier reported that the stimulus package, which was approved on Thursday, will include a CNY100bn ($14.64bn) investment in 2009 and 2010 for upgrades in oil products, and an investment of CNY400bn for the construction of 20 new large petrochemical projects.
“The government will unveil more details of the stimulus plan soon. [Economics in] the petrochemical industry is very complicated so more time is needed for the details to be hammered out,” Xiong Jie, a petrochemical analyst from Huatai Securities in ?xml:namespace>
“There is no doubt the stimulus plan, including the recent credit support from the local banks, will help the whole industry and drive the economy growth,” he added.
But the petrochemical market should be cautious as the construction of these projects would cause oversupply in near-term, said Hou Hongsen, an analyst at Shenzhen-based China Jianyin Investment Securities.
“In this stimulus plan, I don’t find favourable policies for fine and specialty chemicals, which caught me by surprise. Fine and specialty chemicals are very crucial for absorbing the upstream raw materials.
“The government still gives more support to building refineries and crackers, and I am worried the refined products and ethylene will be in oversupply in a short period,” he said.
Further details of the package, including the total amount, will still have to be firmed up when the board of state-owned refiner PetroChina meets today, said a company source.
"No accurate numbers have been received yet," he told ICIS news.
Construction of large-scale projects such as refineries and crackers, and the speeding up of advanced technology transformation would be pushed by
“PetroChina’s refinery and cracker projects are still under construction. The plan is good news for us. The government’s support has put our minds at ease,” a second source from PetroChina said in Mandarin.
PetroChina’s subsidiary Guangxi Petrochemical has a
Its two other units – Fushun Petrochemical and Daqing Petrochemical – are also building crackers with 800,000 tonne/year and 1.2m tonne/year capacities, respectively, but these are not likely to start up this year, the source said.
China's largest petrochemical producer Sinopec may also get funding assistance for some of its projects under the petrochemical stimulus package, industry sources said. Sinopec officials could not be immediately reached for comments.
Beijing-based news daily China Security Papers reported that the package will support 40 projects, which will be an equal mix of on-going and new projects.
The latest package follows similar stimulus plans for the vehicle, steel, textile, heavy machinery, shipbuilding, electronics and information technology industries.
($1 = CNY6.83)
Bohan Loh and Dolly Wu contributed to this article
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