Panel discussion: A ‘New Horizon’

for China’s petrochemicals market

in the post-pandemic period

Nigel Davis, ICIS Insight Editor

Amber Liu, Head of Petchem Analytics, Asia
Rachel Qian, Lead Analyst

ICIS Global Outlook Seminar - EPCA 2020

Virtual Conference

9 October 2020
China government claimed a new development pattern with
domestic cycle as the main body and mutual promotion of
domestic and international cycles
Drivers Key consumption area

Easy Monetary policy Stimulate Construction

+ economy
Fiscal policy Packaging

Domestic consumption Boost Consumer goods

stimulus consumption
Automobile

Enlarge
New infrastructure Textiles
investment

Home appliances
Improvement on the
Raise export
production efficiency
tax rebate rates Agriculture
+ resources centralization

Medical 2
Source: ICIS Analytics
Total over 19m tonnes from confirmed projects in China of
additional ethylene capacity between 2020 and 2023

WANHUA CHEMICAL GROUP 1000 2020

TIANJIN BOHAI CHEM. GROUP 300 2021 JILIN CONNELL CHEMICAL 135 2020
SINOPEC SABIC TIANJIN PC 300* 2021 HENGLI PC 1500 2020
SHANDONG SHOUGUANG LUQING PC 750 2021 LIAONING BORA/LYONDELLBASELL IND. 1000 2020
HEILONGJIANG HAIGUO LONGYOU PC 400 2020

SHAANXI YANCHANG COAL YULIN EN. AND CH. 300 2020

China
QINGHAI DAMEI COAL INDUSTRY 300 2023
PETROCHINA TARIM CHEMICAL 600 2023 ZHEJIANG PETROCHEMICAL 1400 2020
PETROCHINA LANZHOU PC 800 2023 ZHEJIANG SATELLITE PETRO-CHEMICAL 1250 2021
NINGBO HUATAI WEALTHY POLYMER MAT. 600 2021
SHENGHONG REFINING & CHEMICAL 1100 2022
SINOPEC-SK WUHAN PC 300* 2021 SANJIANG FINE CHEMICALS 1000 2022
ZHEJIANG PETROCHEMICAL 1400 2022

SINOCHEM QUANZHOU PETROCHEMICAL 1000 2020

SINOPEC GUIZHOU ZHIJIN 300 2023
SINOPEC ZHONGKE (GUANGDONG) REF.& CH. 800 2020
Unit: KT/a FUJIAN GULEI PETROCHEMICAL 800 2021
Note：* shows expansion PETROCHINA/PDVSA 1200 2022
SINOPEC HAINAN PC 1000 2023
Source: ICIS Supply & demand Database 3
 New capacity enjoy the integration advantage; squeezed
margin might change producers’ behavior
Global HDPE cost* competitiveness Northeast Asia HDPE variable margin
Jan – Sep 2020, USD/tonne Jan 2016 – Sep 2020, USD/tonne
500
453 1,000
422
388
Average cost 800
Ø 343
600

169 400
128
200

0
Mideast US Northwest Northeast Southeast India Jan-16 Sep-16 May-17 Jan-18 Sep-18 May-19 Jan-20 Sep-20
Europe Asia Asia
-200
Note: Variable cost, fixed cost & depreciation is not included
Source: ICIS Analytics

4
High inventories will become normalization to reflect re-
balancing progress between new supply and demand

China Costal MEG Inventory

Dec 2017 – Sep 2020, Unit: kt

1,600

1,400
Current
1,200
inventory level
1,000
Previous
800 inventory level
600

400

200

0
Dec-17 Jun-18 Dec-18 Jun-19 Dec-19 Jun-20
Source: ICIS
5
Accelerated imbalance of MEG value chain

Global Polyester Fibre Demand Growth Rate Global MEG Supply & Demand, Operating rate
2006 – 2025, tonne, % 2019 – 2021, tonne, %
50,000 90
15%

85
40,000
10%
80
30,000

5% 74
20,000
71
70
0%
10,000

-5% 0 60
2019 2020 2021
Capacity Consumption Operating rate
-10%
Source: ICIS Supply & demand database
6
MTO: High operating rate driven by attractive margin

China CTO/MTO operating rate NEA naphtha-based VS MTO-based PP margin*

Jan -Sep 2020, % Jan - Sep 2020, $/tonnes
120
1,000

80

500

40

0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Jan-20 Mar-20 May-20 Jul-20 Sep-20

MTO CTO Naphtha-based MTO-based

Note: Variable margin, fixed cost & depreciation is not included

Source: ICIS Analytics
7
Nigel Davis Amber Liu Rachel Qian
Editor – Chemical Insight Head of Asia Petchem Analytics Methanol, MEG
Nigel.Davis@icis.com Amber.liu@icis.com Rachel.qian@icis.com
+44 020 8652 3397 +86-21-5155 0140 +86-21-5155 0263

Thank you!