Production Increased with Higher Prices

By Feng Shiliang of CPCIA

In May 2006, China's petroleum and chemical industry remained
going up in production. Among the 65 kinds of petrochemical
products that have been tracked by CPCIA (China Petrochemical
and Chemical Industry Association), the output of 61 types
increased compared with the same period of 2005, accounting for
93.8%.
     Pulled by the soaring crude oil prices, 92 out of 156
chemicals being tracked had a higher price than that in April
2006.

Production

According to the statistics released by the National Bureau of
Statistics of China, in May 2006, the total output of crude oil
reached 15.72 million tons, a rise of 2.5% over the same period
of 2005, and the output of natural gas jumped by 18.3% to 4.61
billion m3.
   The crude oil processing amount was 25.215 million tons in
May 2006, a year-on-year increase of 5.7%, therefore the output
of oil products has a growth of 5.7% to 15.219 million tons. Among
the oil products, the output of gasoline in May 2006 was 4.583
million tons, a year-on-year increase of 5.5%, while the diesel
output rose by 5.2% to 9.723 million tons. The output of kerosene
reached 912 thousand tons, the highest level since 2006, a rise
of 12.4% over the same period of 2005. However, due to the slack
demand, the output of fuel oil dropped by 11.5%.
   In May 2006, the output of chemical fertilizers was 4.56
million tons, an increase of 12.4% compared with the same period
of 2005, in which the phosphate fertilizers dedicated the
highest rise of 19.1%. Pesticides production climbed up by 23.2%,
compared to May 2005. Among the pesticides, the output growth
was 23.2% for herbicides, 24.2% for insecticides, and 14.2% for
fungicides.
   In May 2006, the output of some inorganic chemical materials
rebounded from April 2006, and the output growth was 16.6% for
caustic soda, 8.1% for soda ash, and 50.3% for calcium carbide.
   Due to the expanded capacity, the output of the main organic
chemical materials increased rapidly in May 2006. The output of
ethylene, methanol and pure benzene, in particular, rose by
36.4%, 20.1% and 32.4% respectively over May 2005.
   With several ethylene crackers putting into operation, the
output of synthetic resins further increased. The output of
general-purpose synthetic resins had a record high growth rate
of 32.3% to 2.118 million tons in May 2006 in response to strong
demand, of which the output of PE (polyethylene), PP
(polypropylene), and PVC (polyvinyl chloride) increased by
36.2%, 27.5% and 38.2% compared with May 2005. Synthetic
rubber's output gained as high as 7.6% in May 2006, and the output
of synthetic fibers increased by 27.4%.
   The output of tires was 35.403 million pieces in May 2006,
a year-on-year increase of 5.1%, and the rubber shoes' output
rose by 25.7% to 127.56 million pairs.

Prices

Promoted by the various factors such as the common concern about
the oil supply deficit in the international market, the global
crude oil price continued to increase in May 2006. The average
spot prices of Blent crude oil reached US$70.1 per barrel, an
increase of 43.5% over May 2005, while the average spot prices
of WTI crude oil rose by 42.0% to US$70.9 per barrel. Due to the
price rise of crude oil in the international market, the average
price of Daqing crude oil reached US$68.0 per barrel, showing
a year-on year increase of 37.3%.
    Inorganic chemical materials showed different price changes
according to the strong or slack demand. In May 2006, the prices
of caustic soda (liquid) and soda ash stood at RMB470/t and RMB1
550/t, with a drop of 21.7% and 4.6% respectively compared with
May 2005.
    The oil price hovered at a high level, the prices of quite
a few organic chemical materials displayed an up trend in May
2006, however, impacted by the capacity increase both at home
and abroad, the prices of organic materials dropped by 47.9%
compared with May 2005. CPCIA also reported that the average
prices of propylene, toluene and pure benzene in May 2006 were
RMB9 900/t, RMB8 400/t and RMB7 380/t, a rise of 5.0%, 8.4% and
4.7% respectively over April 2006.
    Due to the constant price rise since 2006 and the sufficient
supply cause by the rapid output increase, the fertilizer market
entered a period of adjustment in May 2006. The average price
of urea in May 2006 was RMB1 880/t, a year-on year increase of
1.6%.
    The prices of synthetic resins showed up trend in May 2006
compared with April 2006, the prices of HDPE (high density
polyethylene) and LDPE (low density polyethylene), in
particular, rose by 7.9% and 9.4%. Due to the price rise of crude
oil and high price level of global PP market, the average price
of PP in May 2006 reached RMB12 350/t, showing an increase of
7.4% over April 2006.
    Due to the drastic price rise in neighboring markets, the
price of natural rubber in May 2006 increased rapidly, the
average price of natural rubber reached around RMB2 4500/t,
hitting the historical record, and brought a great pressure on
the rubber consuming sector. The prices of synthetic rubbers in
May 2006 also showed an overall price increase compared with
those in April 2006, among which the price rise was 5.7% for
styrene-butadiene rubber and 4.5% for cis-1,4-polybutadiene
rubber.