CPCIF Forecasts China’s Petrochem Industry to Grow Stably in 2017

China’s petroleum and chemical industry may achieve RMB14 trillion in main business revenue for 2017, rising 6% - 8% from the previous year, while total profits may be up 7% - 9% YoY to RMB690 billion, with foreign trade to get rid of negative growth, based on estimates by the China Petroleum and Chemical Industry Federation (CPCIF).
Further, the CPCIF forecasts that main business revenue in the nation’s chemical sector may increase 8% YoY to RMB9.95 trillion, and total profits are likely to reach RMB560 billion, boosting 10% YoY.
Industry players will face many uncertainties in 2017, arising from the macroeconomic environment, international oil prices and domestic industrial policies.
From an international perspective, the world’s economy for 2017 will continue to recover slowly: low economic & trade growth, low investment and low inflation will still exist. Global trade can hardly make big progresses because of increasing trade protectionism. The International Monetary Fund (IMF) forecasts the world’s economy to grow 3.4% YoY for 2017, a little more than 3.1% in 2016. Global trade may grow 1.8% YoY in 2017, according to the World Trade Organization (WTO). The number exceeds the growth of 1.7% in 2016, but is far lower than levels before the financial crisis in 2008. Further, the forecast has been below 3% for six consecutive years.
International prices of crude oil have stayed above US$50 per barrel, after the OPEC decided at the end of 2016 to cut oil production. Average price of Brent crude was US$44/b in 2016, and the CPCIF estimates it may reach around US$55/b in 2017, compared with a recent forecast of US$57/b by 35 international institutions. In addition, Brent crude prices for 2017 will fluctuate at a range of US$50-US$65 a barrel, according to the CPCIF report.
While deepening reforms in 2017, China will implement various policies to stabilize economic growth. Hence, domestic economy is to become more vigorous, economic structure is to be optimized continually, and investment in real economy may increase. Furthermore, the depreciation of RMB will benefit exports to some degree. However, great economic downward pressure will still exist, as China’s economic growth is slowing down in the “New Normal” situation. At the Central Economic Working Conference (CEWC), “making progress while maintaining stability” is determined as the keynote for this year’s economic plans. In addition, a growth target of 6.5% is set for 2017 economy.
Today, China is very concerned about the real economy, and this is good for the domestic petroleum and chemical industry. The Chinese government will help industry players cut costs via tax reduction, while enterprises themselves have to reduce factor costs, transaction costs, energy using costs and logistics costs. Further, market-oriented management and technical innovation are both useful to boost corporate profitability.
Effective January 1, 2017 China has resumed a tax rebate rate of 17% on exports of oil products in general trade; eliminated export tariffs on benzene, urea, ammonium phosphate fertilizers, ammonia chloride fertilizers and nitrogen phosphorus fertilizers; cut export tariffs on NPK compound fertilizers, crude oil and crude benzene; removed import tariffs on coal coke/semicoke, ammonia & ammonia water, aviation kerosene and naphtha. In addition, the nation lowered temporary most-favored-nation duty rates for importing certain chemicals, and greatly lowered import and export tax rates for some chemicals. These policies are to help petrochemical enterprises improve capacity utilization, expand overseas markets and enhance competitiveness in the world.