Maoming Petrochemical:    
Market Downturn Poses Excellent Opportunity for Fine Management    

SINOPEC Maoming Petrochemical Co., Ltd. (Maoming Petrochemical), a wholly owned subsidiary of Sinopec Group., is a company that integrates oil refinery and chemical production. It is located in Maoming, Guangdong province. It has a crude oil processing capacity of 13.5 million t/a and ethylene production capacity of 1.0 million t/a. The company boasts more than 70 sets of main production equipment, a complete network of ports, offshore crude oil uploading and rail transport as well as a crude oil and oil products transmission system.
    In November 2008, the sales ratio of processed oil and ethylene in Maoming Petrochemical reached 106.84% and 102.6% respectively. Despite the market downturn and frequent overstock of petrochemicals, Maoming Petrochemical strived to adapt to the slack market and seek opportunities in the crisis through fine management.

New concept opens a broader vision   

From September 2008, as international oil prices fell sharply from the peak, domestic demand for oil and chemical products also dropped dramatically. As a result, Maoming Petrochemical, with oil refinery and ethylene production as its mainstay, faced severe challenges. Manager Li Anxi said, "The current market is indeed very difficult. However, in another way, overwhelming market pressures urge us to optimize our product portfolio and adopt flexible management strategies."
    Crude oil costs account for more than 90% of refining costs. So reduce refining costs became the key to increase profits. In accordance with the company's idea of "refine the worst oil and turn out the best products," the crude oil procurement department tracks the market trends closely, give full play to the company's technical advantages of processing sulfur-bearing crude, increase the procurement of inferior high-sulfur crude and optimize the cost performance in procuring crude oil. Through these efforts, the average price of processed crude oil in Maoming Petrochemical is US$3.34 per barrel lower than Sinopec Corp., so the total cost is reduced by RMB150 million every month if 1.1 million tons of crude oil are processed that month. At the same time, transportation fees are reduced by RMB130 million by choosing the best and cheapest transportation way as well as better transportation structure.
    The mainstays, i.e. oil products and ethylene, of Maoming Petrochemical are sold exclusively by Sinopec Chemical Products Sales Company, a subsidiary of Sinopec Group, However, the sales department of Maoming Petrochemical, in accordance with its strategy of "keeping up with the changing market, flexible management and market segmentation," also took some active measures, such as developing end users and increasing direct sales to stabilize and expand its market. As a result, the marketing/production ratio of processed oil and chemicals in November 2008 exceeded 100% and its 90 000 tons of inventory was sold, avoiding the risk of a price decline. At the same time, in accord with feedback from the sales department, the production department increased the output of No.90 gasoline by 40% and high-standard gasoline by more than 30 000 tons to meet the demand in the Pearl River Delta.

Seek business opportunities in adversities   

Maoming Petrochemical adjusted not only the production and sales strategy of ethylene and oil products, but also the whole product portfolio to cope with the sluggish market. For example, it increased the production of marketable products like clean diesel due to a drop in naphtha demand and increased admiralty fuel oil and sesame oil by 20 000 tons because of its huge demand. In addition, the production process of No.90 asphalt and paraffin was optimized in domestic market and their output was up by 30 000 tons. It also improved its production technology to produce more petroleum with low sulfur content because it sells better than high sulfur petroleum. Through quick response to the market, Maoming Petrochemical ensured smooth sales of processed oil and relatively high processing capacity. The company also adjusted its ethylene product portfolio responsively and increased the production of butadiene by more than 10 000 tons to meet the booming market. Their production of gas-phase polypropylene was also up by 25 000 tons with an increased profit of RMB6.8 million since it sold better than homo polypropylene, selling at over RMB400 per ton.
    Recently, the company found in a market survey that low-density PE lid special materials remains as a gap in the China market now, while every year more than 60 000 tons are imported, so it set out to tackle this technical problem immediately and developed the needed special materials successfully. Its first batch of products was used in high-grade food containers with a price nearly RMB1 000 higher per ton than that of common linear polyethylene products. At the same time, Maoming Petrochemical developed more than 10 new products with high-added value, such as highly rigid polypropylene, highly transparent membrane, full-density high-melting point special materials and highly transparent materials. With these new products, Maoming Petrochemical quickly opened markets in the Pearl River Delta and the southwest region. It also established cooperation with large enterprises like Kingfa Sci. & Tech. Co., Ltd. and Midea Group. Among the new products, ultra high impact polypropylene is used in limousines like Guangzhou Honda; high-density gasoline fuel tank is incorporated in Yapp automobile; high-transparency membrane special materials are used by Hongta Group. These products all enjoy high reputations and have been bright spots in the market downturn.

In addition, Maoming Petrochemical took more than 50 measures in 2008 to conserve energy and increase profit, such as raising its resource utilization rate and saving power, water and gas. As a result, the comparable reaped a profit increase of RMB123 million. It further gained RMB27 million from recycling used materials. Also, the crude oil natural loss rate was reduced to 0.115%, i.e. saving over 10 000 tons of crude oil every year.