Summary: In April 2025, a 7% plunge in
international oil prices impacted China's refining industry. Sinopec faced
profit drops in refining from inventory losses but gained in chemicals from
lower costs, adjusting strategies swiftly. With oil demand peaking amid energy
transition, refineries are shifting to "less oil, more chemicals."
Sinopec is transforming via new energy materials, bio-based products, and green
hydrogen, leading proactive change in industrial transformation.
In April 2025, international oil prices
plummeted by 7% in a single day, with Brent crude prices crashing from $89 per
barrel to $83 per barrel, sending shockwaves through the global petrochemical
industry. For China's leading refining and chemical enterprises, this
represents both a short-term market shock and a profound test amid the wave of
energy transformation – as electric vehicles reshape the energy consumption
structure with an annual sales growth rate of 40%, and as the "double
carbon" goals force the contraction of traditional refining operations,
refineries represented by Sinopec are undergoing a strategic transformation
from a "fuel-based" to a "material-based" model.
I. Oil Price Collapse
The drastic fluctuations in oil prices have
had a significantly dichotomous impact on refineries. Take Sinopec as an
example: its Q1 2025 financial report shows that due to holding a large amount
of high-priced crude oil inventories, it incurred approximately 4.5 billion
yuan in inventory impairment losses under fair value measurement, with the
profit margin of the refining sector dropping by 1.8 percentage points
year-on-year.
However, the chemical business has entered
a "raw material cost honeymoon period": prices of basic chemical
materials such as ethylene and propylene fell by 12%-15% along with oil prices,
driving a 3.2-percentage-point increase in the gross profit margin of products
like synthetic resins and chemical fiber raw materials, and a 19% year-on-year
increase in net profit for the chemical sector.
This short-term market dislocation has
prompted refineries to rapidly adjust their production strategies: Sinopec's
Maoming Petrochemical, Shanghai Petrochemical, and other enterprises have
shifted the processing load of some atmospheric and vacuum distillation units
from fuel production to chemical raw materials. In April 2025, the yield of
chemical light oil increased by 5.7 percentage points from the beginning of the
year to reach a record high of 41.2%.
Private refineries such as Zhejiang
Petrochemical have locked in low-cost raw materials through futures hedging
tools. The landed price of Middle Eastern crude oil they purchased in April
decreased by 18% compared to March, effectively hedging against the decline in
refined oil sales.
II. Energy Transition
The peaking of refined oil demand has
become a consensus in the industry. The International Energy Agency (IEA)
predicts that global gasoline demand will peak at 26.8 million barrels per day
in 2028, a 12% decline from 2023; as the world's largest automotive market,
China's electric vehicle sales accounted for 35% in 2025, and it is expected
that fuel vehicle sales will be halved by 2030 compared to 2020.
Sinopec's 2024 financial report shows that
its refined oil retail volume decreased by 3.2% year-on-year, while sales of
high-end polyolefins used in electric vehicle battery materials increased by
17%, clearly indicating a market inflection point.
Refineries are facing not only shrinking
demand but also a reconstruction of the value chain. The profit pool of
traditional fuel business continues to shrink – in Q1 2025, the wholesale price
of domestic 92# gasoline fell by 22% compared to the same period in 2022, while
prices of general plastics such as polypropylene (PP) and polyethylene (PE)
only fell by 8%, and prices of high-end materials such as POE elastomers and
metallocene polyethylene rose 逆势 by 5%.
This price divergence has accelerated the
process of "reducing oil and increasing chemicals": Sinopec plans to
reduce refined oil production by 5 million tons and increase chemical
production by 3 million tons in 2025, adjusting the output value ratio of
refining to chemicals from 6:4 in 2020 to 5:5.
III. Transformation and Breakthrough Paths
(1) Building a "New Energy Materials
Supermarket"
Sinopec is constructing a material supply
system covering the entire electric vehicle industry chain: in the battery
field, its Yanshan Petrochemical 50,000-ton lithium battery electrolyte solvent
project is 即将投产，with a supporting 100,000-ton/year DMC (dimethyl carbonate) unit
using coal-to-ethylene glycol by-product carbonate technology, reducing costs
by 15% compared to traditional routes; in the automotive lightweight field,
Maoming Petrochemical's developed low-density polypropylene (density
0.865g/cm³) has entered Tesla's supply chain for producing car bumpers, with a
single-vehicle usage of up to 12kg; in the charging infrastructure field,
Shanghai Petrochemical's nylon 66 materials for charging piles have passed UL
certification, with a temperature resistance rating increased to 150℃, meeting
the requirements of 800V high-voltage fast-charging technology.
(2) Layout of Bio-based and Degradable
Materials
Facing the EU's "Plastic
Strategy" to be implemented in 2025, Sinopec is accelerating its bio-based
material layout: its Jiujiang Petrochemical 100,000-ton/year biodegradable
material project uses corn starch fermentation to produce lactic acid
technology, reducing production costs by 20% compared to petroleum-based PLA,
with products having passed the European EN 13432 certification; in the
bio-based lubricant field, Shijiazhuang Refining & Chemical's developed
castor oil-based grease has been successfully applied in wind power equipment,
with a dropping point temperature of 260℃, outperforming
traditional mineral oil products.
In Q1 2025, Sinopec's biodegradable
material sales increased by 68% year-on-year, becoming a new profit growth
point.
(3) Constructing a Green Hydrogen
Industrial Ecosystem
Green hydrogen is regarded as a
"strategic bridge" for refining and chemical transformation.
Sinopec's 10,000-ton green hydrogen demonstration project launched in Kuqa,
Xinjiang, has achieved grid-connected power generation, with a supporting 1,000
Nm³/h alkaline electrolyzer using domestic titanium electrode materials,
increasing electrolysis efficiency to 88%; in Maoming, Guangdong, its 200,000-ton/year
green hydrogen synthetic ammonia plant using hydrogen by-produced from refining
is under commissioning, with products to be used in producing green
fertilizers, reducing carbon emissions by 90% compared to traditional
processes.
It is estimated that if Sinopec's green
hydrogen production reaches 1 million tons by 2030, it can replace 3 million
tons of coal and reduce carbon emissions by 8 million tons.
The 2025 oil price collapse may just be a
stress test on the transformation path, but a more profound change lies in –
when refineries no longer simply pursue crude oil processing volume, but focus
on how many tons of special resins for electric vehicles, how many kilograms of
degradable plastics, and how many cubic meters of green hydrogen can be
produced from each barrel of crude oil, the value definition of the
petrochemical industry is being rewritten.
This is both a passive breakthrough to cope
with energy transformation and an active attack to seize industrial
transformation. In this decade-long strategic transformation, Chinese
refineries are rewriting the new story of the petrochemical industry through a
"material revolution".
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