China Targets 5% Growth in Petchem Restructuring Drive
China aims to achieve more than 5% growth in the added value of petrochemical output in 2025–2026, as part of broader efforts to restructure the industry amid mounting pressure from oversupply, according to a plan released on Friday.
Industrial added value refers to the net contribution of industrial enterprises to the economy, calculated as the difference between the total value of industrial output and the value of intermediate inputs such as raw materials.
The plan, jointly issued by seven government bodies, including the Ministry of Industry and Information Technology, the Ministry of Ecology and Environment, and the Ministry of Emergency Management, called for the revamp of outdated petrochemical capacities or their replacement with new production facilities, while curbing fresh oil refining capacity expansion.
Additionally, the government has reiterated its support for the shift from fuel to chemicals and the development of coal-to-chemicals projects, while emphasizing that the scale and commissioning timeline of new ethylene and paraxylene production capacity should be “reasonably determined”.
However, the plan did not specify a timeline or volume for the phasing out of outdated petrochemical capacity. Sources believe the country’s total oil refining capacity will be capped at one billion metric tons, in line with a government mandate issued last year.
In March, China’s top economic planning agency announced a push to steer the petrochemical industry away from traditional fuels and toward higher-value chemical products at its annual policy meeting.
However, the country’s rapid electric vehicle uptake — which has shifted energy use from transport fuel to petrochemicals — has not cast a bright spot for the sector, where oversupplies have been eating into profit margins and forcing producers worldwide to overhaul the industry.
Measures have already been taken by neighboring countries. Petrochemical companies in South Korea are expected to reduce naphtha cracking capacity by up to 3.7 million metric tons by the end of this year, due to a government-led initiative in August. With 10 major petrochemical makers agreeing to the restructuring plan — collectively aimed at cutting naphtha cracking by at least 2.7 million mt — market sources expect that at least two companies would need to shut down cracker operations or consolidate.
Spot ethylene production cash margins averaged at a $191/mt discount in the week ended on Sept. 26, deepening from a discount of $171/mt one week before, according to the latest data from Chemical Market Analytics by OPIS.
–Reporting by Yiwen Ju, yju@opisnet.com; Editing by Mei-Hwen Wong, mwong@opisnet.com