Review on China's Petrochemical Market in Q1 of 2009 and Prediction in Q3    

By Shu Zhaoxia, the Economics and Development Research Institute of Sinopec Group   

Due to the impacts of the financial crisis, the global economy in 2009 will have negative growth. In the first quarter (Q1), the GDP growths of major developed countries have decreased significantly, and their demand has been weakened remarkably. This resulted in the significant drop of China's exports in Q1. However, in the absence of these export engines, China's GDP grew by 6.1% in Q1, and the Chinese economy has become a major bright spot of the world economy.
    In the first quarter of 2009, due to the weakening international macroeconomic situation, the demands for petrochemical products in Europe and America were still declining. In the Chinese market, because of renewing inventory and a sharp fall in the supply of waste plastics, China's domestic prices of petrochemical products had a marked rebound. Especially in March and April, the prices of polyolefin and purified terephthalic acid (PTA) rose more than 10%. In the first quarter of 2009, the gross profits of petrochemical products were generally higher than those in the fourth quarter of 2008. The gross profits of polyolefin manufacturers using naphtha as raw materials in the first quarter of 2009 were higher than those in the fourth quarter of 2008, but were still lower than those in the first quarter of 2008.
    In the first quarter of 2009, China's equivalent consumption of ethylene was about 6.45 million tons, increasing 21.3% over that in the previous year; the output and consumption of the five general purpose synthetic resins including polyethylene (PE), polypropylene (PP), polyvinyl chloride (PVC), polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS) was 6.67 million tons and 10.523 million tons respectively, up about 8.6% year on year, of which the consumption of PE was 3.53 million tons, up 22.2%, PP 2.71 million tons, up 11.7%, PVC 2.51 million tons, up 1.1%. The consumption of synthetic fibers was 5.2 million tons, down 1.3% year on year, of which the consumption of terylene (polyester fiber) was 4.48 million tons, up 2.6 %, and acrylic fiber 196 000 tons, down 16.6%. Among synthetic fiber raw materials, the consumption of PTA was 3.92 million tons, down 2.3% year on year, mono-ethylene glycol (MEG) 1.9 million tons, up 11.3%, and acrylonitrile (AN) 300 000 tons, up 14.5%. The consumption of synthetic rubbers was 6.24 million tons, down 13.7% year on year, of which the consumption of butadiene rubber (BR) was 173 000 tons, down 11.7%, and styrene-butadiene rubber (SBR) 2.31 million tons, down 6.1%. The consumption growth of ethylene relies heavily on the consumption growth of PE and MEG, so increased consumption of PE made the equivalent consumption of ethylene also rise sharply.
    As a result of unexpected high demands in the first quarter, the predicted demands for petrochemical products in 2009 have been raised here, including that the predicted equivalent demand for ethylene has been raised from the previously predicted 21.3 million tons to 22.75 million tons, and its predicted growth rate has been raised from estimated 1.1% to 8.0%.
    China has been impacted by the world's financial crisis, but its domestic GDP growth in the first quarter of 2009 still reached 6.1%. The figure is lower than that in the fourth quarter of 2008, but the March data show that China's domestic economy had positive changes, its overall performance is better than expected, and that China's "RMB4 trillion economic stimulus package" is gradually taking effect. China's economy has passed through the most difficult period and has started to recover, although its exports may be still in the recession. It is estimated that China's GDP will be restored in Q2 and Q3 of 2009, growing by 7.2% and 8.0%, respectively.

The predicted supply of petrochemical products in Q2 of 2009:

In the second quarter of 2009, it is expected that the output of ethylene will be 2.5 million tons, down about 1.7% year on year. Among synthetic resins, the PE output will be 1.8 million tons, up 1.2% year on year, PP 1.95 million tons, up 6.0%, PVC 2.1 million tons, down 15.3%. Among synthetic fibers, the terylene output will be 5 million tons, down 4.3% year on year, and acrylic fiber 150 000 tons, being flat year on year. Among the output of synthetic fiber raw materials, PTA output will be 2.6 million tons, up 13.2% year on year, MEG 480 000 tons, up 7.9%, and AN 250 000 tons, up 5.5%. Among the output of synthetic rubbers, the BR output is expected to be 115 000 tons, down 18.4% year on year, and SBR 180 000 tons, down 4.3%.


The predicted demand for petrochemical products in Q2 of 2009:

In the second quarter 2009, it is expected that the equivalent demand for ethylene will be 5.2 million tons, with a year-on-year decline of 6.5%. Among synthetic resins, the demand for PE will be 2.8 million tons, down about 5.8% year on year, PP 2.6 million tons, up about 2.1%, PVC 2.3 million tons, down about 10.5%. Among synthetic fiber, the demand for terylene will be 4.8 million tons, down 4.0% year on year, and acrylic fiber 190 000 tons, down 2.6%. Among synthetic fiber raw materials, the demand for PTA is going to be 4.05 million tons, up about 6.0% year on year, MEG 1.95 million tons, up 0.6%, and AN 320 000 tons, down 1.5%. Among synthetic rubbers, the demand for BR will be 160 000 tons, down 16.7% year on year, and SBR 230 000 tons, down 5.3%.


The predicted supply of petrochemical products in Q3 of 2009:

In the third quarter of 2009, the maintenance of ethylene facilities at Shanghai SECCO Petrochemical Company and Sinopec Qilu Petrochemical Company will be completed, and the 800 000 ethylene of Fujian Refining & Chemical Company Ltd. will also be full operational, but other ethylene crackers may reduce their operation load accordingly. In Q3, the new 1 million t/a ethylene unit in Dushanzi may start commercial run. So in Q3, the ethylene output will be higher than that in Q2, and the average operation rate of the downstream facilities may drop slightly, but the output of major petrochemical products will increase to a certain extent compared with that in Q2.
    It is predicted that in the third quarter of 2009, ethylene output will be about 2.75 million tons, with a year-on-year increase of 12.3%. Among synthetic resins, the output of PE will be 1.85 million tons, up 11.8% year on year, PP 2 million tons, up 14.3%, and PVC 2.20 million tons, down1.4%. Among synthetic fibers, the output of terylene will be 5.48 million tons, up 14.2% year on year, and acrylic fiber 150 000 tons, up 13.6%. Among synthetic fiber raw materials, the output of PTA will be 2.9 million tons, up 16.0% year on year, MEG 500 000 tons, up 3.7%, AN 270 000 tons, up 28.0%. Among synthetic rubbers, BR output will go up 32.7% year on year to 130 000 tons, and SBR 195 000 tons, up 3.2%.


The predicted demand for petrochemical products in Q3 of 2009:

It is predicted that in Q3 of 2009, the equivalent demand for ethylene will be 5.5 million tons, up 5.5% year on year. Among synthetic resins, the demand for PE will be 3 million tons, up about 4.7% year on year, PP 2.8 million tons, up about 7.3%, PVC 2.4 million tons, up about 3.2%. Among synthetic fibers, the demand for terylene will be 5.2 million tons, up 14.7% year on year, and acrylic fiber 180 000 tons, up 9.8%. Among synthetic fiber raw materials, the demand for PTA will reach 4.15 million tons, up about 7.9% year on year, MEG 2 million tons, up 12.1%, and AN 360 000 tons, up 27.7%. Among synthetic rubbers, the demand for BR is expected to reach 155 000 tons, up 15.5