An industry leader in Beijing recently cautioned that the recession failed to curb overheated investment in China's petrochemical industry in the first half of 2009. New structural problems emerged.

In an interview with China Securities News, China Petro & Chemical Industry Association's deputy secretary in general, Feng Shiliang, made a couple interesting points:

First, investment in the chemical industry (including polymers) leaped 30 percent in the first half compared to a year ago. Second, capacity utilization remains low. By the end of June, the capacity utilization rate is 82 percent for ethylene crackers and 51 percent for PVC facilities.

I can quickly name some resin projects under construction or planning.

In Shanxi province, privately owned coal mining company Xiang Coal Group is finalizing its 200,000-metric-ton (441-million-pound) PVC joint venture project with a scheduled start-up in October. With partner Henan Hengtong Chemicals Co. Ltd., Xiang Coal decided to invest 2.5 billion yuan (US$ 366 million) to build 600,000 metric tons (1.3 billion pounds) of coal-based PVC capacity back in 2007.

Coal-based PVC production model has been losing advantages, as China's industrial-use electricity prices surged and crude oil prices fell. But the projects keep moving forward.
Another example is publicly traded Xinjiang Zhongtai Chemical Co. Ltd., which today announced plans to build 1.6 million metric tons (3.5 billion pounds) of coal-based PVC capacity in the next five years.
Both projects are located in the central and western parts of China, which led China's GDP growth in the first half, compared to the more developed east coast.