China plans to phase out some of its outdated petrochemical plants by 2029 and upgrade others, under new directives issued by the authorities on Friday.
The Chinese authorities will review which facilities will be upgraded and which will be closed, using lists of outdated petrochemical plants compiled by local governments in recent months, according to documents by the central government cited by Reuters.
China and its refiners and petrochemical producers have been struggling with low margins amid overcapacity and falling demand for road transportation fuels. The Chinese authorities last year stepped up efforts to curb overcapacity that has led to refining losses and thin petrochemical margins amid a glut of producing units that has overwhelmed the entire Asian market.
China is already the world’s biggest producer of ethylene and polyethylene, after building seven petrochemical complexes over the past ten years. Previously, the United States was the biggest producer of the petrochemical commodities.
Yet, refining and chemicals firms have not been spared from the so-called “involution” in China, which refers to excessive and self-defeating competition among Chinese companies for limited resources and opportunities.
At the end of last year, the buildout in new petrochemical capacity in China fueled fears that the country could tip the global market into oversupply, hurting smaller petrochemical producers.
China is relatively resilient amid the current global oil and products crunch, which is reducing naphtha supplies in Asia and hurting the petrochemical industries in South Korea and Japan.
China is somewhat different from the rest of the Asian market, as it benefits from large volumes of coal?to?chemicals capacity and extensive world?scale refinery?chemicals complexes, analysts at ICIS said last week.
By Tsvetana Paraskova for Oilprice.com
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