China environmental checks to hit petrochemical output anew

Author: Fanny Zhang

2021/09/10

SINGAPORE (ICIS)--China’s month-long environmental inspections of five provinces housing industrial hubs have prompted independent refineries and some petrochemical plants to either reduce operating rates or shut production.

On 25 August-2 September, the country's environment watchdog - the Ministry of Environment and Ecology (MEE) - dispatched working groups to  Jilin (northeast), Shandong (east), Hubei (central), Guangdong (south) and Sichuan (southwest), to check on the provinces' compliance with environmental regulations.

China's second round of crackdown on non-compliant industries across more than 30 provinces started in July 2019.

Petrochemicals are categorized among high-polluting industries.

Several independent refineries in the eastern province of Shandong have cut run rates by as much as 40%, while two of them with a combined capacity of 4.2m tonnes/year have shut operation.

On the other hand, major refineries operated by Chinese petrochemical giant Sinopec - such as those in Maoming, Zhanjiang, Zibo, Wuhan - continue normal operations.

Provincial environment authorities typically order closure of polluting or high-emission factories ahead of the arrival of MEE inspectors.

For example, Zibo-based Jianlan Chemical was ordered to shut its two 2-ethylhexanol (2-EH) plants in Shandong on 24 August, two days before government inspectors arrived, a company source said.

The plants, which have a combined capacity of 210,000 tonne/year, will not be restarted until the month-long inspection is over, the source said.

Production of propylene oxide (PO), epoxy resin, acetic acid and downstream, fertilizer, coal-based methanol, among others, will all be affected, industry sources said.

In Shandong, a number of PO producers have reduced operating loads by an average of 20-30% since last week, and may not resume normal operations in the short term, industry sources said, as the sector faces a major sewage-disposal issue.

Coal-chemical plants, particularly coking facilities, have mostly reduced run rates, market sources said.

There is a tendency for some factories to under-report data on production and actual capacity to government authorities, to meet emission requirements, industry sources said.

The MEE cited a fertilizer producer in Shandong which underreported its ammonia and urea capacities by a third; while noting that in Jilin, Guangdong, Sichuan and Hubei, illegal disposals of wastes and sewages are polluting water and land.

In view of this, more rigorous cross-data checks are expected in the new round of inspections, with those found in violation facing heavy fines.

“Many tire producers have to shut recently because of the environment issue and this has caused sharp price fall of rubber,” said Zhang Junfeng, senior analyst at brokerage China Merchant Securities.

Natural rubber prices at the Shanghai Futures Exchange have shed 2% in the first eight days of September.

Focus article by Fanny Zhang

Additional reporting by Chris Qi, Jady Ma, Claire Gao, Yvonne Shi, Sam Liang, Jean Zou and Anita Yang

Photo: Smoke billows from chimneys at a chemical factory in Tianjin, China - 2008. (Source View China Photo/Shutterstock)