Difficulties Are There   

A report of China Petroleum and Chemical Industry Association (CPCIA) showed that the situation for the petrochemical industry was still hard in April, although the drop slowed. Prices of some petrochemicals moved up compared to March, domestic demand for some major chemicals were expanding and investment in chemical industry increased steadily. Exports were still difficult. Many uncertainties left for the petrochemical industry's prospect.   
    In April, 33 589 designated companies (all state-owned enterprises and non-state-owned enterprises with annual sales of over RMB5 million) in the petroleum and chemical industry reported a combined production value (output multiplied by current price) of RMB502.94 billion, a drop of 8.4% year over year, compared with RMB498.35 billion in March. In which the production value in the chemical sector increased by 1.3% over the year-ago month, increasing 1.8% than that this March, the oil and natural gas exploration sector declined 38.3% year on year but increased 3.4% than March, the refining sector descended by 14.1% yearly and by 1.6% month on month. Accumulated for the first four months, the total production value was RMB1 769.68 billion with an annual drop of 12.4%.
   China processed 29.427 million tons of crude oil in April, up 6%. In April alone, the output of chemical fertilizer, pesticide, tire, synthetic rubber, synthetic fiber polymers and soda ash increased by 10.5%, 14.1%, 13.7%, 28.9%, 12% and 5.3% respectively over the year-ago month.  
   CPCIA reported that domestic demand for part of chemicals were picking up in spite of a softened chemical market in overall. China's total sale amount of oil products was 17.34 million tons in April, the monthly largest in 2009. At the end of April the oil products in stock declined 15.4% compared with one month ago. The apparent consumption (output plus imports minus exports) for chemical fertilizer in the first quarter surged by 18.1% year over year, naphtha 22.4%, sulfuric acid 4.6%, methanol 49%, polyethylene 18.7%, polypropylene 14.3%, polyvinyl chloride (PVC) 14.8%, tire 21.2% and yellow phosphorus 40.4%. According to data of the railway administration, the railway transportation of crude oil and chemicals in April increased 1.4% and 14.5% respectively over March.
    In April CNPC, Sinopec Group, CNOOC, Sinochem and Shaanxi Yanchang Petroleum posted a combined profit of RMB27.142 billion, increasing 44.8% year over year while the total sales declined 28% to RMB207.72 billion. Their accumulated sales and profit in the first four months was RMB742.52 billion and RMB73.744 billon respectively, fell 29.5% and 9.5%.
   CPCIA reviewed that the demand in overall was still slack without sufficiently driving power. April's consumption on electricity dropped 3.3% year on year, and dropped 5.2% on the preceding month, which did not support the data of increased production value. The related governmental departments explained that the mismatch between the production growth and power consumption decline may derive from the result of energy conservation, but did not exclude other possibility.
   CPCIA warned domestic petrochemical players the exports situation was still hard. According to the data of CPCIA, the exportation in the period of January to April clamped down by 24.3% year on year for the whole petroleum and chemical industry, the drop was 23.2% in April alone. A double digit drop arose for the exports of basic raw chemical materials, fertilizers, pesticides, coatings, pigments and rubber products. The imports of organic chemicals, synthetic resins, synthetic fiber monomers continued a fast growth, bringing more and more impacts on domestic market. Operation rate remained low in April. It was about 92% for ethylene, 85% for soda ash, 79% for caustic soda, 63% for calcium carbide, 54% for PVC, 50% for methanol, 62% for phosphate fertilizer and 79% for refineries.

By Feng Shiliang
May 29th, 2009