China's Petroleum and Chemical Industry Posts Good Results for H1    

By Feng Shiliang, China Petroleum and Chemical Industry Association (CPCIA)  

(Continued Issue 22 page 7)

For the petrochemical industry, CPCIA also pointed out three issues worth paying attention to.  
    First, for the petroleum and chemical industry, the investment, the apparent consumption and the output increased rapidly, on the other hand, the exports, actual consumption, market prices and profit rate did not recovered, and even worsened than before. Such a contradiction at least illustrated that the current economic performance for the industry existed structural problems and the industry is operating on a base far from solid.
    Second, domestic banks totally increased loans by RMB7 370 billion in the first six months, supplying a sufficient money flow in the market. Nevertheless, many petrochemical firms, particularly small sized ones, are still difficult to borrow money, therefore recovering slowly in production. The decline rate of production value for the industry in April, May and June was 8.4%, 7.2% and 8.1% respectively over the same period of 2008, without significant month by month improvement. This condition showed that the driving of increased money supply to the petrochemical industry was insufficient, delayed and in a low efficiency.        
    Third, trade protection spreads over the world. In 2009 China's petrochemical industry came across seven antidumping cases by other countries and eight anti-subsidy or special safeguard measures cases, involving carbon black, barium carbonate, truck tire, waterproof rubber shoes, citric acid and citrates, phthalic anhydride, soda ash, nylon cord fabric, sedan tire, sodium nitrite, tire, dimethoate and oxo alcohol, which is much more than the previous year.

Expectation on the economic performance in H2

Soft demand in the international market will bring directly negative impact on the exports of China's petrochemical products, being the major global factor that may affect domestic petrochemical industry. Some segments that hold a big supply surplus, such as rubber products, inorganic raw materials and chemical fertilizers, will be impacted seriously.    
    Domestic demand and governmental guidelines in policy will play more important roles in affecting the economic performance of the petrochemical industry in H2. At present the government tends to keep in conducting an active financial policy and a moderate loose money policy in H2, on the base of remaining stable and sustainable, with a possibility of adjusting slightly in some aspects in line with changed conditions. Domestic demand for petrochemicals is expected to go on a slow growth in H2.
   CPCIA projected that the production value (output multiplied by price) of petrochemical industry will possibly achieve a positive year-on-year growth from September. Within which, the chemical sector may grow positively in July, dominating other sectors. For the whole year, the total production value may drop a little. The profit for the petrochemical industry will continue to recover in H2, making the whole year drop in profit less than 10% annualized. The investment in this industry will also remain to grow in the remaining months while the fall in exports and imports will go on.