Production and Prices Continue to Climb

Feng Shiliang, CPCIA

According to the CPCIA (China Petroleum and Chemical Industry
Association), production continued to grow rapidly in May this
year. Viewing upon the 65 chemicals tracked by CPCIA, the output
of 63 chemicals increased compared with the same period of 2006,
while 49 chemicals enjoyed a double digit growth rate. Sales and
trading were active, and prices climbed. Among 151 chemicals
recorded, the prices of 76 chemicals went up more than in the
preceding month.

  Production    

In May China's total industrial production was RMB443.42 billion,
an increase of 19.5% year on year, of which gross production in
the crude and natural gas exploration sector was RMB69.78
billion, falling 0.9% due to the decreased crude oil price. The
refining sector reported total production of RMB177.77 billion,
an annualized growth rate of 14.4%. The chemical manufacturing
sector contributed RMB238.57 billion - a rise of 29.6%. In the
chemical manufacturing sector, the growth rates of the synthetic
materials and specialty chemicals segments were 36.8% and 36.1%
respectively, leading the sector, with the chemical fertilizer
and chemical pesticide segments falling behind, at 24% and 23.4%
respectively, due to stable price and production.    
    In May crude output reached 16.055 million tons, maintaining
the 2% growth rate of April. The output of natural gas was 5.74
billion cubic meters, increasing 26.3% compared with the same
period of 2006. Altogether China processed 27.96 million tons
of crude in May, an increase of 9.7%. Production of agrochemicals
continued to increase rapidly. Output of chemical fertilizers
increased 13.8% to 5.114 million tons, while output of chemical
pesticides increased 26.7% to 177 thousand tons.   
    The high growth rate of phosphate fertilizers firmly
supports the demand for sulfuric acid. China produced 4.504
million tons of sulfuric acid, increasing 11.6% - even faster
than in March and April. Demand for nitric acid and hydrogen
chloride was slack, causing a slowdown in production growth. In
spite of restrictive policies, calcium carbide output increased
19.1% to 1.197 million tons, riding a brisk demand from the PVC
manufacturing segment.   
    The output of pure benzene and methanol increased crazily,
with an increase of 27.1% and 31.3% respectively. There was rumor
that the export rebate for Chinese makers of inorganic chemicals,
coatings, dyestuffs and pigments will be cancelled from July 1st
this year, which will have serious impact on the makers of those
products in the near future. The output of coatings, dyestuffs
and pigments in May increased 13.3%, 16.7% and 13.8%
respectively. Production of synthetic resins increased 20.7% in
May compared with the same period of 2006, while April of this
year was 14.3% higher than April 2006. China manufactured 218
thousand tons of synthetic rubbers, increasing 39.4% while the
output of tires reached 46.94 million pieces, hitting a new
historical high and increasing 41.4%.

  Price

Supported by the rapidly growing domestic economy, the strong
growth of exports, the increased cost of energy and of mineral
resources, and policy changes protecting environment, bulk
prices of chemicals will undoubtedly increase with little
possibility of a drop. In May caustic soda was being traded at
a high price, pushed by the rapid increase in the production of
alumina, papers and synthetic washing agents. 30% caustic soda
was sold at RMB660 per ton, increasing 40% over the same period
of 2006. Soda prices were also supported by the glass
manufacturing segment. Recently many small-scale calcium
carbide manufacturers were forced to shut down because of
failing to meet requirements of environmental protection, or
stopped production themselves due to the increased price of
power, so the price of calcium carbide remained up. The price
of liquid chlorine went down again to RMB1 260 per ton, a drop
of 31.5% compared to May 2006.    
   Organic chemicals prices were supported by international
crude oil prices. The price of xylene, in particular, showed a
strong increase in May and reached RMB9 000 per ton, increasing
10.1% over April. Stopping the Xiamen 900 000 t/a PX project may
have caused the price increase. Methanol prices continued to
drop. PVC prices climbed to RMB7 330 per ton, an increase of 8.1%
compared to that in April this year, supported mainly by the cost
of raw materials and high freight prices. New sources of natural
rubber started to reach the market, which caused the price of
synthetic rubbers to go down. The SBR price averaged RMB15 400
per ton in May, a drop of 7.2% compared with the month before.
    The detailed data are listed in the table on page 23-24 this
issue.