Price and market trends: China exempts C2, PTA, polyester projects from state approval

24 May 2013 09:20  [Source: ICB]

China will expedite petrochemical industry expansion as it decided to exempt some undertakings from central government approvals, which tend to delay project implementation, industry sources said on 17 May.

The country's State Council announced the previous day the revocation of National Development and Reform Commission (NDRC)'s power to approve some investments, including those related to renovation or expansion of ethylene (C2), purified terephthalic acid (PTA) and polyester projects.

 

 New projects often face delays

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In a list issued on 16 May, the State Council enumerated 71 investment items that will be exempted from central government's approval and 20 items whose approval will be relegated to the local government.

Industry players raised concerns that this major policy shift could aggravate China's overcapacity in some petrochemical products.

"The exemption [from NDRC approval] will exacerbate PTA and polyester's oversupply," a major market player said.

China's PTA plants are running at an average reduced capacity of around 60% this year from close to 90% in 2011, following a heavy capacity expansion in 2012, industry sources said.

"The exemption of approval from NDRC doesn't mean China will allow more PTA projects," a northeast Asian PTA producer said. Notwithstanding the simplified process on making investments in these projects, securing funding will still be a big problem, industry sources said.

"Banks will not lend money to the money-losing industries," a major PTA trader said.

China's PTA producers have been making losses since the second half of 2012 because of excessive supply, according to ICIS.

Hengyi Petrochemical, which is the parent firm China's largest PTA producer Yisheng Petrochemical, has posted an 84% decrease in its 2012 net profit to yuan (CNY) 314m ($51m) because of rapid PTA expansion.

China's new investment policy effectively farms out the ­responsibility of monitoring individual industries to the Ministry of Land and Resources and the Ministry of Environmental Protection, another local PTA ­producer said.

Enterprise investments to be exempted from NDRC approval

  • Civil airport investment and construction by enterprise
  • Paper and pulp projects
  • 300 tonnes/day or above polyester projects
  • Telecoms investment
  • 1,500 tonnes/day or above sugar projects
  • 1m tonnes/year or above new oilfield construction
  • 2bn tonnes/year or -above new gasfield construction
  • Cold rolling steel projects
  • Ethylene expansion projects
  • PTA, TDI and PX expansion projects

By: Becky Zhang
+65 6780 4359



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