Production Rose while Prices Moved Up     

By Feng Shiliang, CPCIA    

According to the February report of CPCIA (China Petroleum and Chemical Industry Association), vigorous progress has resulted from the government's stable financial policies, adjusting the industrial mix and promoting harmony and moderate development. In January-February China's petroleum and chemical industry operated well with value rising while volumes were reduced, its production growth slowed down rationally. It presents that the excessive growth trend in the chemical industry was efficiently controlled.
    The balance between demand and supply is good with an overall of sale/production ratio of 97.3%. Demands on some basic inorganic chemicals are brisk, pushing prices up. It should be noted however that prices of chemical fertilizers surged in February.

Production   

Total production of China's petroleum and chemical industry in January-February was RMB915.442 billion with an annualized growth rate of 29.5%, compared with the 21.9% growth in the same period of 2007. In comparison, the total average growth of all industries was 26% in January-February. Data came from the National Bureau of Statistics.
   Of the RMB915.442 billion total production value, 51.7% was contributed by the chemical sector, 30.9% by the refining sector and 17.3% by the crude oil and natural gas exploration/digging sector. Affected by the rocketing price of crude oil and natural gas, the production value achieved by the crude oil and natural gas exploration/digging sector saw annualized growth of 46.5%. The chemical sector grew 27.3% while the sector had grown 31.7% in January - February last year. The slowdown was attributed to the snowstorm.
   In the first two months, the petroleum and chemical industry exported RMB59.298 billion, increasing 27.7%. Supervisory departments should be concerned that the export values of chemical fertilizers and pesticides increased by 110.8% and 99.2% respectively.
   In the first two months, the output of natural gas maintained high growth of 20.3%, 7.6 percentage points over the growth in the same period of 2007. The crude oil output grew slightly with an annualized rise of 1.2%. China processed 55.812 million tons of crude oil, up 7.4%.
   Due to the slack demand and the snowstorm, the chemical fertilizer output increased by 5.1% only. Potash fertilizer, which is in very short supply at present, suffered a sharp output decline of 49.6%. China's top potassium chloride producer Qinghai Salt Lake Industry Group starts production March 14th. The company is used to discontinuing production in January-February due to hard weather. An analyst probing into the decline found that domestic potash fertilizer output in January-February usually uses potassium sulfate made from imported potassium chloride. China had not completed the import contract for this year until now, so domestic potassium sulfate companies lack feedstock. In addition, due to transportation difficulties, around 700 000 t/a potassium chloride inventory in western region cannot be deliver to eastern region.
   The output growths of important organic chemicals output dropped sharply compared with the growth in the same period of 2007, due to factors including increased cost, plunging demand and so on. China manufactured 1.81 million tons of ethylene in the first two months, up 3.8% year-on-year, compared with the 27.1% growth in 2007. The output growth of pure benzene was 8% while it was 54% in Jan-Feb 2007. The output of methanol grew by 21.4%, compared with 50.4% in the same period of 2007. Growth slowed dramatically for polyvinyl chloride, polyethylene, polypropylene, synthetic fibers, sulfuric acid, caustic soda, calcium carbide. The output growth of tires, soda ash and phosphorus ore were significantly higher than in Jan-Feb 2007.

Price

Among 174 chemicals being traced by CPCIA, 118 chemicals enjoyed a price increase in February compared with the same period of 2007. The spot price of crude oil from CNPC Daqing oilfield was US$92.08 per barrel, up 63.15%, while that from Sinopec Shengli oilfield was priced at US$77.45 per barrel, up 62.06%. The average growth of chemical fertilizer prices was as high as 34%. The price of mono-ammonia phosphate grew by 78.9% to RMB3 500 per ton, the largest growth. The sulfuric acid price stopped increasing in February. Sulfur prices continued an upsurge with a yearly growth of 220%. The prices of soda ash, caustic soda, monoethylene glycol, propylene and calcium carbide all grew around 20%. Prices of pure benzene, methanol and terephthalic acid dropped.
    
Pressure and difficulty

Presently the cost pressure on chemical firms is becoming larger and larger. Prices of energy and raw materials keep growing relentless, affecting the production costs of all chemicals. Strict requirements for protecting environment along with rising labor costs also narrow the margin of chemical firms. On another front, chemical firms find it difficult to pass cost increases on to downstream users. Chemicals that are consumed by other industries such as textiles and light industry are suffering a price decline. Inorganic chemicals that are enjoying a price surge, such as sulfur, yellow phosphorus, sulfuric acid and calcium carbide, are all consumed by the chemical industry itself. Chemical firms find no way but try their best in reducing consumption per production unit, innovating and improving management.