China Olefins Market E-News

China’s supply of olefins is enlarged, as many non-petro-based olefins facilities will be commissioned in H2 2014.

However, the CTO sector suffers from unprecedented challenge. In Sept. 2014, the NDRC released the Catalogue for Encouraged Industries in Western China, from which coal chemical projects including CTO projects were absent. This indicates that the CTO sector will lose support from government, which somehow hit the CTO projects planned to construct. Moreover, it will present an unclear future for the approved and in-progress CTO projects. The fact that the coal chemical enterprises lose the support from tax preferential policies will directly lead to the increases in operation costs. However, with large investment, the projects commissioned and under construction have to run as scheduled.

Some experts stated that guidance should be given to coal chemical industry to sustain its development, instead of simply encouragement and limitation. The policy adjustment is regarded as a way to rationally impel the development. Enterprises are suggested to hold a positive attitude. In Q4 2014, the hot topics may include the progress of CTO projects under construction and the production costs for CTO enterprises.

Comparatively, the downstream of olefins, plastics still cannot get rid of the gloomy situation. From the perspective of the semi-annual financial reports released by enterprises, the plastic industry in H1 2014 did not perform well. Sinopec Corp. even suffered from great losses in its chemical sector, which can be attributed to the oversupply of common resins.

In addition, the mixed ownership reform in state-owned enterprises has officially started up. Sinopec Sales has sold part of its equity. Whether the reform can work in accordance with market mechanism? Will the reform be promoted to Sinopec Chemical? These also deserve attention.

What’s more, the auto industry is involved in anti-monopoly activities, boosting hot discussion. Specifically, CCM paid more attention to the points that whether the anti-monopoly investigation will quicken the development of auto new materials, and whether the demand for plastics will be strengthened. Currently, the household appliance industry is witnessing a stable development. The demand for plastics in the future may come from auto and architecture industries. That is to say, these two industry’s performance will decide the development of plastic industry. The industry dominating the R&D of new materials will win the initiative in the competition.

The RMB/USD exchange rate in this issue are USD1.00=RMB6.1680 on 1 Sept., 2014, sourced from the People's Bank of China.

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