Prices of Basic Chemicals Surge and Supply is in Deficit   

By Feng Shiliang, CPCIA  

"The economic performance of China's petroleum and chemical industry continued its steady increase in November," said Feng Shiliang, secretary general of China Petroleum and Chemical Industry Association (CPCIA), "growth in the production of some basic petrochemicals slowed down compared with the preceding month. Balance is basically reached between supply and demand." Tight supply of oil products has eased somewhat. "But prices of more and more chemicals are surging rapidly," added Feng.
     In response to the requirements of the central government, Sinopec Group and CNPC recently increased the production of diesel while reducing the light oil cuts used for chemicals, so the production of ethylene was 891 thousand tons in November, 20 thousand tons less than October. The November production of pure benzene was also affected, reduced 50 thousand tons below that of October. However, most petrochemicals had a high yearly growth in production, typically double digits.
   In spite of strict control by governments, production growth of some products with high energy consumption or surplus capacity continued their fast growth, such as soda ash, calcium carbide and caustic soda. Production of agro chemicals including fertilizers and pesticides surged rapidly in the winter, driven by exports. A source close to PetroChina Company said that in October and November the company reduced oil products inventory by nearly 500 thousand tons and imported around 200 thousand tons of diesel. Sinopec Corp. also reported that it imported 423 thousand tons of diesel in December.
    Prices of some organic chemicals went slack. "The cost transfer chain beginning from crude oil is blocked," analyzed by Feng, "Profit at downstream firms is narrowed, forcing them to change their products portfolio."
    Both sulfuric acid prices and sulfur prices rocketed crazily, with a yearly growth of 64% and 100.8% respectively. The imports FOB price of sulfur reached US$171/t in October from US$72.8/t in January. Mono-ethylene glycol led all organics with a year-on-year price increase of 63.7%. This means that China's economy is developing briskly.
    Notes: CPCIA and the National Bureau of Statistics of China modified the cumulative data according to a cautious recheck. The data of spandex (polyurethane fiber), tires, paper pulp, pure benzene, dyestuffs and viscose rayon were modified greatly. Some duplicated statistics were deducted, such as the data of paper pulp, pure benzene, dyestuffs and viscose rayon. The output of new startup projects are included, for instance the data of ionic membrane process caustic soda, spandex and tires. The two authorities did not give details of the modifications.  
-- CCR Editors