Sinopec is China's leading petchem producer. Its H1 results, out this week, confirm the blog's concern that China's growth surge has stalled.
The chart shows Sinopec's view of domestic demand growth for ethylene (blue line). After falling to zero in 2008 as the Great Recession began, growth rebounded to ~10% in 2009-10. But in H1 it was only 1.9%.
At the same time, Sinopec's own ethylene production jumped 19% versus H1 2010 to 5 million tonnes. Polymer and fibre intermediates also grew ~11%. And Sinopec expect ethylene production to continue rising in future years, as it aims to become world no 1 by 2014.
This would not be the strategy of a western producer, focused on profitability. But as the blog has discussed before, Sinopec's role in petchems is to be a utility, supplying product reliably to the downstream factories, to help keep employment high.
China's vast stimulus package and credit bubble have so far mitigated the full impact of its production surge. But if the world falls back into recession, its effect is likely to become more apparent in global markets