China's dependence on imported polyethylene and polypropylene is expected to continue, even as the country plans to add almost 10 billion pounds of capacity for those materials during the next three years.
Imported PE accounted for 52 percent of Chinese demand in 2004, with imported PP holding a 38 percent stake in that market, according to Sinochem International Corp.'s Howard Yao, who spoke at the DeWitt & Co. World Petrochemical Review, held March 30-31 in Houston.
Yao is general president of the plastics business for Shanghai, China-based Sinochem, which is part of the state-owned Sinopec oil firm.
The Chinese market - including Sinopec and state-owned oil firm Petrochina - will add about 3.2 billion pounds of PE capacity and 2.3 billion pounds of PP capacity this year, Yao said. That will be followed up between 2006 and 2007 with 2.9 billion pounds of PE and 1.4 billion pounds of PP.
Sinopec itself will add 770 million pounds of high density PE and 550 million pounds of low density PE in 2006-07. The firm also will add 440 million pounds of PP in 2006.
All three projects will take place in Maoming, Yao said.
Overall new PE capacity in 2005-07 will be split evenly between Sinopec/Petrochina and foreign joint ventures of BASF AG, BP plc and Shell Oil Co. In PP, Sinopec/Petrochina will account for 60 percent of new capacity in 2005-06, with the rest coming from outside firms.
Experts say Chinese demand for PE and PP is expected to grow 10.2 percent this year and 9.6 percent in 2006.
The film market accounted for almost 60 percent of Chinese demand last year, with raffia fiber accounting for almost half of all PP demand.
China spread its PE imports among a variety of supplying countries last year.
Saudi Arabia was China's largest linear LDPE trading partner with a 29 percent share of imports, while Malaysia led in LDPE imports with 19 percent and South Korea in HDPE imports with 33 percent.
In spite of the strong import presence and competition from foreign firms adding capacity in China, Yao said he expects Sinopec and Petrochina to be able to compete on cost.
Yao added that concerns about an overheated Chinese economy may be unnecessary.
Chinese gross domestic product growth is expected to cool to 8.5 percent in 2005 and 2006 after finishing 2004 at 9.5 percent.
``We had a soft landing after a similar growth period from 1991-97,'' Yao said.
``The Central Authority will cool the economy by raising interest rates, tightening bank credit and limiting investment approvals. It made a similar move in 1993.''