OREANDA-NEWS. June 24, 2011. Chinese petrochemicals output growth appeared to be moderating in 2011 as tightening lending conditions led to lower rates of domestic consumption growth.

 In 2010, ethylene output grew 32.2% y-o-y, to 14.19mn tonnes, primary plastics grew 18.3% y-o-y, to 43.61mn tonnes, and plastic products grew 21.1% y-o-y, to 58.31mn tonnes.

 The growth trend was consistently upwards throughout most of 2010, indicating that a recovery was being sustained despite the rapid rise in production in the Middle East and a large polymer inventory at the beginning of the year.

 However, there were signs of moderation from December 2010 with ethylene and primary plastics output failing to beat November highs but staying stable, while plastic products dropped. In the first four months of 2011, ethylene output was up 34.3% y-o-y, to 5.26mn tonnes, primary plastics output was up 8.9%, to 14.99mn tonnes, and plastic products output was down 0.4%, to 15.88mn tonnes.

 Meanwhile, China Petrochemicals Corporation (Sinopec) reported that chemicals prices increased, with its output of ethylene and synthetic resins rising 26% and 20% in the quarter. The moderation in output is related in part to the tightening lending conditions amid government efforts to combat inflation. This situation has primarily affected the construction and automotive sectors, which had made orders on the basis of assumptions of strong growth levels.

 Capacity continues to grow as China maintains its position as the world's petrochemicals consumption growth driver. In March 2011, China's National Development and Reform Commission gave its final approved a previously announced USD 9bn refinery and petrochemical JV between Sinopec and Kuwait Petroleum (KP)'s subsidiary Petrochemicals Industries Company (PIC).

 The news follows environmental and technical approvals of the project by the Chinese government last year. The complex, planned at Donghai Island near Zhanjiang, China will include a 300,000b/d refinery and a petrochemical complex based on a 1mn tpa ethylene plant. Completion is expected in 2013. KP will supply the crude oil to the venture.

 Sinopec will hold 50% of a JV, with PIC owning 30% and Dow Chemical confirmed as one of two additional overseas partners in the project. The remaining partner will replace Shell, which pulled out of the project in late 2009. Talks have been held with BP and Total as Shell's replacement. The Donghai Island complex is to consist of a 1mn tpa naphtha cracker and include downstream polyolefin and EG plants.

 Although China's petrochemicals market ratings are the highest in Asia, it remains weighted down by a relatively poor financial and trade infrastructure and negative risks specific to the petrochemicals sector, namely reliance on imported feedstock and overcapacity in some segments.