China's Petroleum and Chemical Industry in Q1   
Feng Shiliang, China Petroleum and Chemical Industry Association (CPCIA)

The financial turmoil's impact on China's petrochemical industry goes on deepening, with a still big pressure of downturn, CPCIA stated in a report on April 24th. However, by month breakdown, some positive changes began to arose, prices of some chemicals stopped declining. CPCIA attributed the positive changes to the effect of stimulus and adjustment measures implemented by the government.
    As of the end of March, China's petroleum and chemical industry has 33 555 enterprises above designated size (all state-owned enterprises and non-state-owned enterprises with annual sales of over RMB5 million), the number grew 19.2% year over year. They totally contributed to a production value (output multiplied by price) of RMB1 263.76 billion in the first quarter, a decline of 14%. Within which, the value in March alone was RMB498.35 billion, a year-on-year decrease of 8.4% but a growth of 26.3% over February.

Output   According to the latest statistics for March, among the major chemicals traced by CPCIA, 71% witnessed an output growth, going on the rebounding trend in February. For the first quarter, 50% of chemicals enjoyed a year-on-year increase in output.

Demand   Thanks to the demand expanding policy, domestic demand for energy, plastics and agrochemicals moved on in March over the preceding month. CPCIA's report showed that the sale amount of oil products in the country reached 17.0374 million tons in March, a monthly highest in 2009, increasing 13% over that in February. As of the end of March, the total inventory of oil products dropped 6.13% than one month earlier. The urea inventory in manufacturers was 780 thousand tons at the end of March, a month-on-month decline of 33.9%, according to the report of China Nitrogenous Fertilizer Industry Association. The railway's statistics showed that the delivered amount of petroleum by railway in March increased 3.1% over February, the combined delivery amount of fertilizers and pesticides increased 14.7% year over year, and up 7.8% over February.

Profit   In March the combined sale and profit recorded by CNPC, Sinopec Group, CNOOC, Sinochem and Yanchang Petroleum, China's five top petroleum firms, were RMB214.563 billion and RMB28.254 billion respectively, a down of 24% and an increase of 13.2% over the previous year, up 26% and 160% on the preceding month. For the first quarter, the five giants posted a sale of RMB534.8 billion, down 30% compared with the same period of 2008, a profit of RMB46.6 billion, down 25.7%.

Investment   As for investment in the first quarter, the petroleum and chemical industry accomplished actually an investment of RMB135.38 billion, up 22.5%, comparing with the growth of 33.4% in the same period of 2008. Within which, the chemical sector increased 41.9% to RMB87.49 billion, the petroleum and natural gas exploration sector dropped 5.7% to RMB27.99 billion and the refining sector fell 4.3% to RMB16.87 billion. In the chemical sector, the investment in the fertilizer segment augmented 55.1% with 230 new construction projects launched, particular in phosphate fertilizer that saw a 77.5% of investment growth. The investment in the pesticide segment also surged 108.7%. CPCIA warned that the overcapacity still exists in both segments, new investors should take a caution. By ownership, the investment conducted by domestic firms enhanced by 23.6%, that for Hong Kong, Taiwan and Macao funded firms grew by 6% and foreign funded firms soared 18.3%.

Price   In March, according to the supervision of CPCIA, prices of some chemicals showed a bottom sign. Price of 0# diesel was averaged at RMB5 625 per ton, a year on year decline of 6.7%, up 0.02% over that in February. The 93# leadless gasoline was traded at RMB6 750 per ton on average, down 3.1% year over year but up 1.2% over preceding month. Urea price climbed 3.8% over February to RMB1 920 per ton, declining 1% compared with the same period of 2008. The sulfuric acid price suffered a drastic drop of 63.6% to RMB360 per ton, fell 14.3% than one month earlier. Soda ash price also saw a year on year decline of 44.7% and a month on month decline of 11.5%, staying RMB1150 per ton. Price of pure benzene grew by 6.2% over the preceding month, to RMB3 590 per ton, or a year-on-year decline of 61.1%. With a month-on-month growth of 3.3%, methanol price averaged RMB1 900 per ton, still decreased 44.1% from the same period last year. PVC (polyvinyl chloride) price continued to go down by 1.9% on the base of February, to RMB6 360 per ton, which was 18.5% lower than the same period last year. The prices of polypropylene, caprolactum and butadiene rubber were RMB8 300/t, RMB11 350/t and RMB13 000/t respectively, a year-on-year decline of 34%, 51% and 42.9%, while a month-on-month increase of 0.6%, 3.2% and 1.2%.

Problem   Huge falling pressure is still there. The 14% quarterly drop for production value created a historical low for the petroleum and chemical industry over ten years. Among the chemical sector, the segments such as inorganic acid, inorganic alkali, phosphate fertilizer, synthetic fiber monomer reported a combined loss in the first quarter. And many signals marked that the production in the second quarter may possibly perform a negative growth, the crisis impact is expected to go further, according to the projection of CPCIA.
   Although prices of some chemicals seemed to have touched bottom, the drop trend for the whole market remained unchanged. In a report of the National Bureau of Statistics, the March price index covering 1 148 kinds of petrochemicals was 81.3, compared with the index of 100 in the same month of 2008 and 82.23 in this February. The second quarter market is predicted to fluctuate with possible drop.
   Exports in March continued to shrink. The total value for exported petrochemicals fell 23% year over year, compared with the drop of 16.6% in February. The accumulative value for exported petrochemicals in Q1 descended 24.1%. The imports of some organic materials and polymers including polypropylene and methanol surged in the first quarter.
    Analysis on the output in March showed the production facility in some sectors operated well below the full capacity, representing a heavy overcapacity. The elimination pressure is large still. Upon the statistics of CPCIA, the average operation rate was around 88% for ethylene crackers, 70% for soda ash, 76% for caustic soda, 50% for calcium carbide, 30% for methanol unit, 67% for phosphate fertilizer and 89% for refineries.