China cuts back ethylene to boost fuel

Some minor relief may be at hand for hard-pressed cracker operators, particularly those in Asia. Sinopec announced today that it will reduce ethylene output by 65 KT in June (the equivalent of 1 cracker’s output), in order to allow it to boost fuel production by 200 KT. This will be done by bringing forward planned cracker maintenance at Zhongyuan, Dongfang and Shanghai. The aim is to respond to government directives to ensure fuel supplies after last month’s earthquake.

Balancing petchem and fuel needs seems to be becoming a recurring factor in China. I noted back in January that olefin imports had surged in late 2007, as the government stockpiled fuel in advance of the Olympics. 1 tonne of ethylene production equates to an extra 5 tonnes of diesel. But before we get too cheerful, we have to remember that there is a cloud to this particular silver lining. The International Energy Agency is now forecasting that China’s 2008 oil demand may rise 4.7 percent to 7.9 mbd, which will help support today’s already high energy prices.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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