FocusChina 5-year gov't housing plan to boost petrochemical demand

01 March 2011 05:38  [Source: ICIS news]

China 5-year govBy Judith Wang

SINGAPORE (ICIS)--China’s plan to build 36m units of government subsidised apartments over the next five years ensures strong demand for construction-related petrochemicals through 2015, analysts said on Tuesday.

This should ease worries about demand for the petrochemical industry despite the lowering of annual GDP growth target to 7% for 2011-2015 under China’s new five-year plan.

The first 10m of the government-subsidised apartments would be built this year, Premier Wen Jiabao said on Sunday in an online chat session with users of Xinhua.net, a state-owned web-based news organisation.

Petrochemicals such as polyvinyl chloride (PVC), polyethylene (PE) and polypropylene (PP) were expected to benefit from the planned robust construction activities, analysts said.

China’s petrochemical sector is entering a new boom cycle this year. Most petrochemical products, especially upstream products, are still severely dependent on imports,” said Li Guohong, an analyst from brokerage firm China Galaxy Securities in Beijing.

China
is a key market for petrochemicals in Asia, with the country’s domestic supply still lagging demand due to delays in start-up of a number of projects since 2008, analysts said.

Prices of petrochemical products may continue their uptrend, with a solid demand support from China, they said.

The Chinese authorities were expected to hammer out the framework for the petrochemical industry over the next five years some time in April.

China
’s revised annual GDP expansion target, which was half-a-percentage point lower than the one set for 2006-2010, should not be a cause of serious concern, analysts said, citing that China had consistently outperformed against its own target.

Its average GDP growth for the previous five years stood at 11.2%, with annual expansion registered at between 9.2% to 14.2%, according to data from the National Bureau of Statistics.

“In practise, GDP growth will probably average comfortably more than the target, while more attention is expected to be given to equality of growth, not just the absolute amount,” Commonwealth Bank of Australia said in a research note.

Given the strong pace of its economic growth on its road to industrialization, China had overtaken the US as the top energy consumer in the world.

Wen, at the online chat at Xinhua.net, had said that the country was able to cut its energy consumption per unit of GDP by 19.1% over the last five years, but this was lower than the 20% target set for the period.

Under the new five-year plan, China is eyeing another reduction of energy usage by 16-17%, Wen said.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Judith Wang
+65 6780 4359



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