Guidance for Stimulus Program Issued    

To actualize the central government's adjustment and stimulus program for the petrochemical industry, the China Petroleum and Chemical Industry Association (CPCIA) issued guidance to match the government's program on October 22nd.
   CPCIA stated that China's petrochemical industry has an urgent need to adjust its industrial structure in order to solve the following four problems.

A. The capacity to make various low-end products in China's petrochemical industry now is in surplus while China is importing an abundance of high-end specialty chemicals and advanced chemical materials. Chinese enterprises have insufficient ability to innovate, therefore many local governments and firms can construct only new projects that produce the already oversupplied chemicals, causing the flooded market to be more serious. Some products exported by Chinese companies are processed abroad into specialty and high-end chemicals that, in the end, are sold back to China at a huge margin.    

B. The petrochemical industry consumes resources and energy heavily. Coal, crude oil and natural gas are not only the essential energy sources but also the necessary feedstock. Presently, the Chinese petrochemical industry's demand for resources and energy depends heavily on imports. The import dependence ratio of crude oil approaches 50%, with potassium chloride exceeding 50%, natural rubber hitting 75% and sulfur most severe at 90%. The domestic supply of resources and energy cannot afford the chaotic expansion in the high energy consuming sectors such as chemical fertilizers, soda ash, caustic soda and calcium carbide.    

C. At present the amount of sewage, flue gas and solid wastes released by the petrochemical industry ranks first, fourth and fifth among all the country's industries. This industry's discharges of COD, NOx and sulfur dioxide are also huge. To become sustainable, the petrochemical industry must clean up production, eliminate outdated equipment and constrain development of those products with high consumption and pollution.  

D. China has several hundreds, even thousands, of manufacturers in the refining, chemical fertilizers, pesticides, methanol, calcium carbide, chlor-alkali and soda ash sectors. The total capacity of such products is among the world's largest, but the average capacity per manufacturer is well below the global norm. Some factories need to buy raw materials from distance. Some areas with environments that are more fragile than average host many petrochemical companies who discharge a lot of pollutants.

   CPCIA announced that the guidance aligns with the central government's adjustment and stimulus program for the petrochemical industry, and aims to
  * increase the local supply of high-end products,
  * reduce the proportion of energy-intensive products,
  * actively promote innovation,
  * eliminate outdated capacity,
  * control market entry,
  * improve the industrial structure and
  * upgrade overall competitiveness.  

Highlights of targets by
sector (simplified)

1. Petroleum and natural gas. Prospecting for and exploring oil and gas fields will be strengthened. The second west-east gas transmission pipeline, the Sino-Myanmar oil-gas transmission and the Sino-Russia oil-gas transmission lines will be constructed. An advanced pipeline transfer network covering major refineries nationwide will be set up.    

2. Refining. By 2015, several refining bases - each with a capacity of 20 million t/a - will be constructed, helping the country's total refining capacity reach 550 million t/a. Refineries with a capacity less than 1 million t/a will be closed.

3. Ethylene. Companies are encouraged to use light raw materials. New technologies such as CPP will be promoted. The existing large ethylene enterprises shall continue to expand and renovate in order to reduce consumption and enhance competitiveness. By 2015, China's total ethylene capacity will reach between 21 million t/a and 23 million t/a, meeting 60% to 65% of local demand.

4. Synthetic materials. The whole petrochemical industry shall accelerate development and production of functional resins, degradable polymers, re-generable resins, butyl rubber, ethylene-propylene rubber, fluorosilicon rubber, acrylated rubber. The development of polyisoprene rubber will be supported, China shall industrialize the production of polyisoprene rubber as quickly as possible. The local supply ability of powder rubber, liquid rubber and environmentally friendly filling oil for emulsion polymerized styrene butadiene rubber shall be increased.
As for fibers, development emphasis will be placed on differential chemical fiber and multi-fiber materials. The proportion of functional fibers will be increased. China shall focus on developing special fibers such as carbon fiber of high modulus of elasticity, aramid fiber, ultra high molecular polyethylene fiber and polyphenylene sulfide fiber. China shall research and develop polytrimethylene terephthalate (PTT) and promote the industrialization of 1,3-propylene glycol that is a raw material of PTT. China will further expand production capacity of para-xylene, aiming to meet 85% of local demand.     

5. Organic chemical raw materials. China shall encourage companies to develop plants for manufacturing monoethylene glycol by ethylene oxidation process, making propylene oxide by propylene direct oxidation process, glycerin to epichlorohydrin, butadiene to adiponitrile, separation and deep processing of cracked C5, deep processing of coal tar, important intermediates of pesticides and pharmaceuticals, etc. China shall constrain outdated technologies such as making acrylic acid by the acetone cyanohydrin process, grain based propanol/butanol, making propylene oxide by the chlorohydrination process and making epichlorohydrin by the saponification process.

6. Rubber products. By 2015, radial tires will be 85% of total tire production. Import of wasted and exhausted tires will be strictly controlled. China will speed up the development of rubber belts and hoses with high value added, safety, energy conservation and environmental friendliness. Among the carbon black production units using the dry process granulation process, those with a capacity of less than 15 000 t/a must be closed, except the units producing special carbon black and semi-reinforced carbon black. Clean production processes for rubber auxiliaries will be promoted widely. By 2015, 85% of the total rubber auxiliary output will be environmentally friendly.     

7. Chemical fertilizers. Permits to nitrogenous and phosphate fertilizers manufacture shall be stricter, and disorderly expansion at the low end will be controlled. Development will be emphasized on high potency compound fertilizers and slow-release fertilizers. By 2015, 85% of fertilizer output, or more, will be high in nutrients. Waste treatment technologies will be promoted widely in the nitrogenous fertilizer manufacturing segment.

8. Pesticides. China shall accelerate the elimination of pesticides with high toxicity or high risk. Development emphasis will be placed on water based formulations, new auxiliaries and aromatic hydrocarbon-free solvents. By mergers and shutdowns, the number of pesticide technical manufacturers will decrease to around 200 in 2015 from the current count of more than 500.  

9. Chemical minerals. China will try to ensure the supply of phosphorus, potash, sulfur, fluorine and other resources currently in short supply. The comprehensive utilization of minerals and solid wastes at