By John Richardson
LAST week we discussed how inland markets in China - which are booming thanks to government efforts to raise rural income levels - offer huge opportunities for petrochemicals producers.
Here are a few further reasons to believe that it will be local rather than overseas producers which benefit the most.
Beijing has been building big, new worldscale crackers in order to help satisfy demand in western markets, including the 1.2m tonne/year PetroChina facility at Dushanzi in Xinjiang province, north western China. It is the country's biggest cracker, is integrated with a 10m bbl/day refinery and is located within a gas-processing hub.
China also plans to increase the average size of existing and future crackers to 700,000 tonne/year from just over 540,000 tonne/year, as part of the 12th Five-Year-Plan.
The plan also stipulates that the percentage of non-naphtha feedstock used in the country's C2 plants should rise to 20% by 2015 from 5% in 2010. If forecasts of a global oversupply of liquefied petroleum gas (LPG) come true, this might help Chinese producers better compete with low-cost Middle East imports.
Another concern for importers is the scale of China's petrochemical ambitions. It wants to raise total C2 production to 24m tonne/year by 2015 from 15.2m tonne/year in 2010.
"Projects are sure to be delayed, and perhaps even reduced in scale, but nobody doubts the central government's determination to boost petrochemical self-sufficiency in the long term," said a polyolefin industry source
"I actually think that at the commodity end of the business, even with strong inland growth, it is going to be very hard for overseas producers to compete, unless they are located in the Middle East.
"The higher-cost guys are going to be caught between the rock of the Middle East and the hard place of bigger domestic capacities. The answer, if you have the technology, is to focus on value-added polymer grades for the developed eastern and southern markets in China."