Sinopec adapts to the New Normal

Economic growth

SHARE THIS STORY

Sinopec Jul13The 2013 edition of the blog’s study on Sinopec* is now available, and highlights the changes that are taking place in Sinopec’s focus as the world transitions to the New Normal.

Sinopec is China’s leading refining and chemical company, and its original role after 2000 was to support China’s emergence as the manufacturing capital of the world.  Today, however, China’s exports are falling rapidly as the West’s economy flatlines with the ageing of the BabyBoomers.

One thing that will not change is Sinopec’s policy of continued investment, without looking for commercial returns.  As the chart shows, since 1998:

  • Chemicals capex has totalled Rmb 204bn, whilst EBIT has been just Rmb 112bn
  • Refining capex has been Rmb 234bn, with a loss of Rmb 72bn at EBIT level
  • Overall, capex in these two areas has been Rmb 438bn, with total EBIT just Rmb 40bn

The Profile also highlights how this capex is expected to continue in 2013, enabling Sinopec to reach global No 2 in ethylene production by 2015.  Chemicals capex is expected to be Rmb 26bn ($4.2bn), with a further Rmb 34bn being spent in refining.

Thus as the world transitions to the New Normal, Sinopec’s new role will be to support the growth of China’s domestic demand. This will have considerable implications for the global petchem industry:

  • Sinopec will continue to maximise production; as the chart shows, its average Operating Rates have been consistently over 100% since 2000
  • This will dramatically reduce the need for imports, particularly from Asia and NAFTA, as domestic GDP growth will also be well below earlier levels

The blog highlighted this potential in the first edition of the Study in 2011. Now it is becoming reality  But unfortunately very few companies have yet begun to appreciate the dramatic changes that will result. They now need to catch up very quickly.

*Please contact phodges@iec.eu.com if you would like a complimentary copy of the Study.

PREVIOUS POST

US oil prices rise as housing starts slip and Detroit goes bankrupt

22/07/2013

Just as the blog feared, H2 seems to have started badly in terms of demand, and ...

Learn more
NEXT POST

A $1m US retirement fund will run out for 72% of retirees

24/07/2013

The BabyBoomer-led Supercycle of economic growth meant the US suffered just 17 ...

Learn more
More posts
G7 births hit new record low, below Depression level in 1933
14/07/2019

If a country doesn’t have any babies, then in time it won’t have an economy. But that...

Read
From subprime to stimulus…and now social division
06/07/2019

The blog has now been running for 12 years since the first post was written from Thailand at the end...

Read
Resilience amidst headwinds is key for H2
30/06/2019

Resilience is set to become the key issue as we look forward to H2, as I note in a new analysis for ...

Read
Perennials set to defeat Fed’s attempt to maintain the stock market rally as deflation looms
23/06/2019

Never let reality get in the way of a good theory. That’s been the policy of western central b...

Read
Europe’s auto sector suffers as Dieselgate and China’s downturn hit sales
16/06/2019

Trade wars, Dieselgate and recession risk are having a major impact on the European auto industry, a...

Read
2019 Global Outlook – a mid-year update: ACS webinar on Thursday
04/06/2019

There will be no shortage of important topics to discuss on Thursday, at my regular Chemistry and t...

Read
US-China trade war confirms political risk is now a key factor for companies and the economy
12/05/2019

There are few real surprises in life, and President Trump’s decision to launch a full-scale tr...

Read
Uber’s $91bn IPO marks the top for today’s debt-fuelled stock markets
28/04/2019

Uber’s IPO next month is set to effectively “ring the bell” at the top of the post...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more