At the 2024 Petrochemical Industry Development Conference, Sun Weishan, vice president of the China Petroleum and Chemical Industry Federation, issued the production capacity early warning and investment direction of key petrochemical products.

The report points out that structural contradictions in China's bulk petrochemical products have emerged. On the supply side, the production capacity and output of China's bulk petrochemical products have increased significantly. According to federation monitoring data, China's total production of major chemicals was about 720 million tons in 2023, an increase of about 6 per cent over the same period last year, while the growth rate fell by about 0.4 per cent year-on-year in 2022. With the commissioning of the refining and chemical integration project and the downstream "extension chain" and "complement chain", petrochemical raw materials and synthetic resins are at the peak of production expansion. The production capacity of traditional chemical basic raw materials continues to expand. In addition, the production capacity of propylene oxide and epichlorohydrin has increased significantly; the production capacity of raw materials such as BDO and calcium carbide has increased; the production capacity of new energy materials has increased sharply; the production capacity of traditional synthetic rubber products has also increased; and the output of chemical fertilizer has increased greatly. On the demand side, the consumer demand for petrochemical products is growing steadily. The demand for ethylene, propylene, epichlorohydrin, acetic acid, lithium iron phosphate as cathode material for new energy batteries, polyester-textile and clothing industry chain, and consumption of chemical fiber raw materials have all increased.

According to the report, the rapid growth of the production capacity and output of China's major petrochemical products and the increasing market supply capacity have better supported the development of the national economy. However, due to a large amount of investment in large quantities of basic raw materials and medium-and low-end chemicals, and the concentrated release of production capacity, the problem of unbalanced development has become increasingly prominent and structural contradictions have intensified.

It is worth noting that the investment enthusiasm of Sinopec chemical industry is high, and the investment risk needs to be concerned. The report points out that the industry is still in the peak period of investment. In the next few years, the production capacity of bulk petrochemical products will continue to grow rapidly. The construction of new projects for ethylene, ethylene glycol and other products is concentrated, and the production capacity is growing rapidly. The oversupply of propylene, polypropylene, refined terephthalic acid (PTA), caprolactam, epichlorohydrin, epoxy resin, cis-polybutadiene rubber, calcium carbide and BDO will become more and more serious. There are also signs of overheating in some high-end products, such as polyolefin elastomers (POE) and lithium iron phosphate.

The report believes that overheated investment will seriously affect the profitability of the industry. According to the National Bureau of Statistics, the total profits of the petrochemical industry in 2023 totaled 873.36 billion yuan, down 20.7 percent from the same period last year. It is precisely because the prices of crude oil, natural gas and most of their petrochemical products have fallen sharply, resulting in the situation of "increasing production and increasing sales without increasing profits" in the petrochemical industry in 2023. According to statistics, the prices of major petrochemical products monitored in 2023 all declined, including propylene, PTA, methanol, ethylene glycol, caprolactam, polypropylene, polyvinyl chloride, butyl rubber and calcium carbide for two consecutive years. The excessive growth of production capacity in the future will lead to more fierce competition and make it more difficult for enterprises to make profits. Therefore, the report recommends that enterprises should be guided to invest accurately and unswervingly promote the high-quality development of incremental assets. This requires controlling the centralized construction of basic bulk chemicals and strengthening the development of high-end and differentiated varieties and brands. It is also necessary to speed up the innovative development of high-end polyolefin plastics, engineering plastics and special engineering plastics, polyurethane materials, fluorosilicon materials, special rubber and elastomers, high-performance fibers and composite materials, functional membrane materials, electronic chemicals, high-performance coatings, high-performance adhesives and other new chemical materials and high-end specialty chemicals. In addition, we should also vigorously support the development of biochemical industry.

Sun Weishan suggested that on the one hand, the industry should strengthen capacity statistical monitoring and early warning. At present, it is necessary to guard against the signs of overcapacity in the chemical industry, and strengthen the monitoring of capacity expansion of hot chemical products, so as to avoid blind investment in a rush. It is suggested that the China Petroleum and Chemical Federation, together with various professional associations and key enterprises, set up a production capacity early warning working group, establish a regular capacity monitoring and early warning mechanism, and improve the release of early warning information. On the other hand, it is necessary to strengthen the evaluation of the advanced nature of new capacity projects. The new petrochemical projects have analyzed the advanced nature and profitability of the project, basically for the content of the project review and preparation, in order to avoid low-level repeated construction of the project, it is suggested that the advanced nature of the project should be evaluated by experts organized by a third party before the project starts construction. Source: Sinochem New Network