11 January 2013 11:33 [Source: ICB]
China's petrochemical market is expected to see increasing capacity expansion in 2013 and beyond, while continuing economic growth bodes well for demand.
China's petchem capacity is set to jump significantly in the next several years
China is expected to grow at 7.6% in 2012 and 5.7% in 2013, while India will grow at 8.0% and 6.6% in the two years.
The fourth quarter of 2012 is likely to see low inflation. However, with rising food prices, greater inflation is expected to appear in the first half of 2013. As such, China is less likely to issue very loose monetary policies.
China will see increasing ethylene capacity in the coming years. Some major plants have already started up, in the latter half of 2012.
Daqing Petrochemical started up its 600,000 tonne/year naphtha cracker in early September of 2012, Fushun Petrochemical started up 800,000 tonne/year cracker in end October, Heyuan Petrochemical plans to start up 240,000 tonne/year methanol-to-olefin (MTO) plant by end 2012. However, the actual output from these new plants will ramp up in 2013.
There are still new plants to start up in 2013 - two naphtha crackers from Sichuan Petrochemical and Wuhan Petrochemical with capacities of 800,000 tonnes/year each.
China's propylene capacity will show high-speed expansion through 2015. According to statistics from ICIS Chemease, propylene capacity will expand 11m tonnes from 2012-2015.
Polyolefins players also see capacity expansion as the main trend in for 2013.
Qilu Petrochemical plans to start up its 250,000 tonne/year high density polyethylene (HDPE) plant in February or March 2013. Sichuan Petrochemical also plans to start up its 300,000 tonne/year HDPE plant and 300,000 tonne/year linear low density polyethylene (LLDPE) plants in 2013. Wuhan Petrochemical will also start up its 300,000 tonne/year HDPE and 300,000 tonne/year LLDPE plants in the middle of 2013.
However, capacity expansions of benzene will be insufficient to meet demand, leading a further shortfall of benzene supply in 2013.
Based on statistics from ICIS China, an increase of 1.3m tonnes/year in domestic benzene capacity is expected in 2013, but the pace of growth is much slower than that in the downstream sectors. Therefore, China's benzene supply will be much tighter in 2013, and more imports are expected to flow into China.
Crude oil apparent consumption in China will reach year-on-year growth of 2.8% to 482m tonnes in 2012, and record another rise of 6.2% to 512m tonnes in 2013.
Processing capacity is likely to gain 2.9% year on year to 461m tonnes in 2012 and achieve another gain of 6.9% to 493m tonnes in 2013. Meanwhile, the import volume will rise by 12.9% in 2013, pushing the import dependence to a high range of around 58-59% for China.
China will welcome a peak capacity increase in line with refineries' expansion projects and Phase II national oil reserves for the first three years of the 12th five-year plan period, according to statistics from C1 Energy, an ICIS service in China. Crude oil demand will grow quickly as a result.
Chinese refining capacities have increased by 16.6m tonnes/year or 3.3% in 2012. The compound annual growth rate (CAGR) of new capacities will reach 9.3% during 2013-2015, and the rate of China's crude demand will be 8.3% in the same period.
The country will continue to record net exports of gasoline, gasoil and kerosene in 2013, but its imports of fuel oil will rise and be supported by the capacity expansion plans of teapot refineries. Net imports of bitumen and petcoke will rise in the year as well.
China's oil products demand growth is likely to slow down in the coming five years due to the promotion of natural gas and electric power in the automobile market. The growth rate may be lower than its crude throughput, which is expected to increase by a CAGR of about 8.0% to reach 678m tonnes by 2017. By then, China will turn into an oil net exporter with about 2% of surplus capacity.
In China, petroleum products are mainly consumed as transportation fuel and chemical feedstock. These two sectors will still record strong growth in the coming years. The government has not yet given a clear strategy and policy regarding to the use of major substitute energies such as electric power, natural gas and alcohol ether fuel in the transportation sector.
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