Report on the Prosperity Index of the Petrochemical Industry    

A report released jointly by the Research Center for the Chinese Economic and Industrial Prosperity Index, the Economic Daily, and China Economic Monitoring Center of the National Bureau of Statistics of China, claims that in the second quarter of 2009 (Q2 2009), there were positive changes in the operation indicators of the Chinese petrochemical industry. Compared to the first quarter of 2009 (Q1 2009), investment and total profits grew substantially in this industry in Q2 2009. At the same time, manufacturing enterprises actively reduced their inventories and controlled their production, leading to a rebound of the business climate index in Q2 2009.
   The report says that in Q2 2009, the prosperity index of the Chinese petroleum sector was 97.87 (with the 2006 level as the benchmark, equal to 100) excluding seasonal factors but not excluding random factors - falling by 0.57 from Q1 2009.
   In Q2, the prosperity index of the chemical sector was 97.13 (with the 2003 level as the benchmark, equal to 100) excluding seasonal factors, but not excluding random factors, falling by 1.25 from Q1 2009.
    *Here the petroleum sector including the petroleum and natural gas exploration and production sector and the petroleum processing and coking sector, defined by the National Bureau of Statistic of China (NBS). The chemical sector including the chemical raw materials & product manufacture sector.  
   After the random factors were excluded, the prosperity index of the petroleum sector and the prosperity index of the chemical sector dropped remarkably in Q2 2009, indicating that in Q2 2009, random factors such as policy and governmental stimulation factors played a positive role in the operation of the entire petrochemical industry.
   In Q2, the business climate index of the petrochemical industry rose slightly from the previous two quarters. The business climate index of the oil and gas exploration sector was 153.5, an increase of 17.0 from Q1, higher than 100 - the critical value of the business climate index. The business climate index of the petroleum processing, coking and nuclear fuel processing sector has risen for two consecutive quarters and reached 117.7 in Q2, rising by 24.5 from Q1 and increasing 47.4 substantially from its lowest point, 70.3, at the end of 2008, higher than the critical value of the business climate index. This shows that the business climate index of the petroleum sector has recovered significantly.
   The business climate index of the chemical sector has also risen for two consecutive quarters. In Q2, it reached 99.4, with a rise of 13.3 from Q1, but lower than the critical value, 100, of the business climate index. This shows that the performance of the chemical enterprises is not good yet.

Production:  

The major products of the petroleum sector are crude oil, natural gas, gasoline, kerosene and diesel. The major products of the chemical sector are ethylene, sulfuric acid, caustic soda, sodium carbonate, nitrogenous fertilizer, phosphate fertilizer, potash fertilizer, chemical pesticides and pesticide active ingredients.
    In Q2, the composite index of petroleum production was 99.02, rising by 1.43 from Q1. It has reversed the downward growth trend since Q1 2008.
    In Q2, the composite index of chemical production was 96.22, increasing 0.59 from Q1, and reversing the downward growth that had been a trend since Q2 2007.

Profits:  

After a preliminarily seasonal adjustment, in Q2, the total profits of the petroleum sector amounted to RMB71.25 billion, dropping by 22.3% from the same period of 2008, but rising by 73.3% from Q1 2009; and the total profits of the chemical sector amounted to RMB47.05 billion, down 16.0% from the same period of 2008, but up 149.7% from Q1 2009.
   The total profits of the petrochemical industry in Q1 and Q2 dropped substantially from the same periods of 2008, but the quarter-on-quarter growth rate of its total profits in Q2 was far higher than Q1, indicating that the profit of the petrochemical industry has improved.

Loss:

In Q2, the total loss of loss-making enterprises in the petroleum sector dropped substantially from the same period of 2008, indicating that the loss situation of the petroleum sector has improved significantly. Their total loss has dropped all the way from the record high of RMB72.68 billion in Q3 2008 and is expected to turn profitable in the future.
    In Q2, the total loss of loss-making enterprises in the chemical sector had a year-on-year growth rate of 20.5%, and 20.6% of chemical enterprises had losses, down 3.8% from Q1 2009, indicating that the loss situation of the chemical sector has also had some signs of improvement.

Accounts receivable:

In Q2, the net accounts receivable of the petroleum sector reached RMB85.17 billion, increasing 49.9% from the same period of 2008, and rising by 14.1% from Q1 2009, indicating that the capital chain of the petroleum sector was still relatively tense.
   In Q2, the net accounts receivable of the chemical sector reached RMB244.98 billion, up 1.4% from the same period of 2008 and 15.0% from Q1 2009. This shows that after the large-scale decrease of accounts receivable in the chemical sector at the end of 2008, there was a slight increase in Q2 2009.

Capital Occupied by Finished Products in Stock:

In Q2, the capital occupied by finished products in stock for the petroleum sector reached RMB45.71 billion, dropping by 14.1% from the same period of 2008, but rising by 0.3% from Q1 2009, indicating that the production enterprises in the petroleum sector took initiative to reduce their inventories and regulate their production and cash flow.
   In Q2, the capital occupied by finished products in stock for the chemical sector reached RMB153.62 billion, up 2.5% from the same period of 2008 and 8.7% from Q1 2009.

Investments:

In Q2, the total investment of the petroleum sector amounted to RMB100.73 billion, a slight increase of 6.2% from the same period of 2008 but a dramatic increase of 216.1% from Q1 2009. The total investment of the chemical sector reached RMB137.99 billion, up 27.7% from the same period of 2008 and 134.2% from Q1 2009. This shows that due to China's large-scale economic stimulus program, the overall investment in the petrochemical industry has increased significantly.

Employment:

By Q2, the number of employees in the petroleum sector has reached 1.4457 million, up 15.7% from the same period of 2008 and 2.3% from Q1 2009. The number of employees in the chemical sector is 3.993 million, an increase of 3.7% from the same period of 2008 and 4.0% from Q1 2009. This shows that the increase in the total investment of the petrochemical industry has led to a substantial rise in employment in this industry.

Prices:

In the first half of 2009, the product prices of the petroleum sector changed dramatically. In Q2, the ex-factory price index of industrial products in the petroleum sector was 75.6 (based on the Q2 2008 level, which is equal to 100), continuing the trend in prices which have been declining since the end of Q3 2008. However, due to the rise of international crude oil prices, the drop rate of product prices in the petroleum sector narrowed in Q2 2009 and showed a stabilized trend. The ex-factory price index of products in the chemical sector declined slightly year-on-year and reached 91.2 (based on the Q2 2008 level, which is equal to 100). As a result of the rise in raw material costs, the declining rate of product prices in the chemical secto