Shandong Province tightens controls on new production capacity in 9 overcapacity chemical industries

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Recently, the General Office of Shandong Province issued the \"Notice on Promoting Structural Adjustment, Transformation, and Improved Efficiency in the Petrochemical Industry.\" The notice requires strict control over the addition of new production capacity in industries that are in surplus, such as oil refining, tire manufacturing, urea production, phosphate ammonium fertilizer production, calcium carbide production, caustic soda production, polyvinyl chloride production, soda ash production, and yellow phosphorus production. For projects that violate these regulations by adding new production capacity, the local governments at the city and county (district) levels, as well as relevant departments and financial institutions, shall not provide services such as land (sea area) allocation, energy assessments, environmental impact assessments, or new credit facilities. Notice from the General Office of the People’s Government of Shandong Province on Promoting Structural Adjustment, Transformation, and Efficiency Improvement in the Petrochemical Industry, Lu Zheng Ban Fa [2017] No. 78. In order to implement the “Guiding Opinions of the General Office of the State Council on Promoting Structural Adjustment, Transformation, and Efficiency Improvement in the Petrochemical Industry” (Guo Ban Fa [2016] No. 57), accelerate the transformation and upgrading of the petrochemical industry in our province as well as the shift toward new forms of development momentum, and enhance the level of sophistication, specialization, intelligence, and sustainability in this industry, with the approval of the provincial authorities, the following measures are hereby announced: 1. Clarify the overall requirements. Guided by the thoughts on socialism with Chinese characteristics for a new era, it is necessary to thoroughly study and implement the spirit of the Party’s policies. We must adhere to the development concepts of innovation, coordination, sustainability, openness, and sharing. Following the development direction of safety, environmental protection, greenness, low carbon emissions, intensification, and efficiency, and with the support of various chemical industrial parks and leading enterprises, as well as innovation-driven approaches and major project developments, we should actively promote structural reforms on the supply side of the industry, optimize the industrial layout, extend the industrial chain, and rapidly build a petrochemical industry system that features close integration between upstream, midstream, and downstream sectors, complete supporting infrastructure, and independent intellectual property rights. This will help transform our province from a major petrochemical producer into a strong one in this field. 2. Reducing excess production capacity: Strict controls should be imposed on the addition of new production capacity in industries with excess capacity, such as oil refining, tire manufacturing, urea production, phosphate ammonium fertilizer production, calcium carbide production, caustic soda production, polyvinyl chloride production, soda ash production, and yellow phosphorus production. For projects that add production capacity in violation of these rules, local governments at the city and county (district) levels, as well as relevant departments and financial institutions, must not provide services such as land (sea area) allocation, energy assessments, environmental impact assessments, or new credit facilities. For advanced process improvement projects that meet the policy requirements, equivalent or reduced replacement is implemented. The approval or registration of all new, renovated, or expanded chemical industry projects shall be carried out in accordance with the requirements of the \"Overall Plan for the Transformation and Upgrading of Work Safety in Shandong’s Chemical Industry\" (Lu Ting Zi [2017] No. 43). By making comprehensive use of legal measures such as those related to safety, environmental protection, and energy conservation, as well as economic tools like differentiated electricity and water prices, petrochemical enterprises that fail to meet safety and environmental standards shall be shut down or restructured in accordance with the law; meanwhile, production capacity that makes use of processes, technologies, and equipment classified as obsolete in the \"Guidelines for Industrial Structure Adjustment (2011 Edition) (Revised)\\" shall be shut down. Fully leverage the market’s mechanism of survival of the fittest and its driving forces to encourage mergers and reorganizations. 3. Elevate the industrial level by accelerating the application of new processes and technologies in the traditional petrochemical industry, and promote the transformation of this industry toward fine chemicals and new types of chemical products. It supports the upgrading of existing refining and chemical plants by utilizing advanced technologies and equipment such as clean production and intelligent control. Refining companies are encouraged to build facilities for producing cleaner petroleum products through processes such as hydrocracking, continuous reforming, isomerization, and alkylation, in order to vigorously develop advanced refining technologies. Carry out demonstration projects for the industrial upgrading of key technologies in modern coal chemical industry to promote the clean and efficient utilization of coal resources. Accelerate the implementation of the innovation and development project for new chemical materials to enhance the industry’s core competitiveness. Accelerate the promotion and application of the Internet of Things, big data, e-commerce, and intelligent logistics in the petrochemical industry. It supports the demonstration and promotion of smart workshops and the replacement of workers with machines in key industries such as petrochemicals, salt chemicals, rubber tires, marine chemicals, and coal chemicals. 4. Optimize industrial layout: Adhere to the approach of \"supporting some, integrating some, transforming some, and phasing out some\" in order to adjust and optimize the industrial layout, and promote the development of larger scales, industrial parks, and integrated refining and chemical operations. Leveraging the strengths of key refining and chemical enterprises as well as the location advantage near ports, efforts will be focused on developing a number of refining and chemical industry clusters and industrial parks. It supports refineries and chemical enterprises located in urban areas to accelerate the implementation of relocation and transformation to industrial parks. Support regions with favorable basic conditions in carrying out planning for petrochemical industry bases or preliminary work for projects such as ethylene and aromatics. Accelerate the planning and construction of crude oil pipelines, port storage facilities, crude oil terminals, and dedicated railway lines. It supports oil refining companies in accelerating the development of their retail terminal networks. 5. Strengthen planning guidance: The Provincial Development and Reform Commission and the Provincial Economic and Information Technology Commission should, in conjunction with relevant provincial departments, study and formulate a plan for the layout and development of the province’s chemical industry. This plan should identify the key areas for development, the key technologies involved, and the direction of development, optimize the industrial layout, improve policy measures, and thus play a effective role in guiding the development of the province’s petrochemical industry. Strengthen the effective integration of development plans for the petrochemical industry, park planning, urban and rural planning, as well as overall land use plans, in order to enhance the scientific nature, guidance value, and practicality of these plans. Further improve standards related to safety, environmental protection, energy conservation, and occupational health, and enhance the applicability and effectiveness of these standards. According to industry experts, once the regulations are implemented, a new wave of production halts could occur, leading to a certain degree of shortage for some products and price increases for others.