9 Key Trends in the Development of the Olefins Industry

Hot Topic 1: Diversified capital entering the basic refining sector, signs of overheated investment. On the one hand, after 2015, driven by various favorable factors such as prolonged low oil prices and a recovery in downstream demand, profits in the basic refining industry increased significantly, entering a period of prosperity that exceeded expectations. This stimulated enthusiasm within the industry and attracted diversified capital to get involved. On the other hand, efforts to develop policies have intensified to support private and foreign investors in entering the basic refining sector. Two factors have led to an influx of diverse capital into the industry. State-owned enterprises want to seize this final opportunity to maintain their market position ； New private players have entered the market on a large scale, and the development pace of private refining and chemical companies, led by the four major private players, is astonishing ； Traditional private refining and chemical companies are also seeking ways to make breakthroughs, while foreign investors are competing to enter the Chinese market.

Hot Topic 2: Rapid growth in propane dehydration, with significant homogenization in downstream applications. After 2013, China’s imports of propane experienced explosive growth. However, whether it is existing or newly built facilities, homogenization in the downstream sector is prominent. Its products are mainly based on propylene and commercial propylene, and the hydrogen produced as a by-product is not effectively utilized, which will have an impact on the industry’s profits.

Hot Topic 3: Projects for producing ethylene through the cracking of light hydrocarbons are also attracting attention. From a policy perspective, the ethylene cracking industry has been working to use lighter feedstocks, and certain progress has already been made in this regard. Over the past decade or so, the proportion of light hydrocarbons in the feedstock composition of steam cracking units in our country has been increasing steadily, while the share of high-cost liquid feedstocks has been declining gradually; this trend is set to continue in the future as well. It should be noted, however, that the proportion of light hydrocarbons in the pyrolysis feedstocks in our country is still far below the world average, and lightening remains the direction for future development.

Hot Topic 4: Persistent surplus of refined oil products, with similar transformation paths for refineries. As the surplus of refined oil products remains a situation that is difficult to reverse and will continue to exist in the future, the ongoing development of integrated refining and chemical projects will place even greater pressure on traditional refineries. Therefore, reducing oil consumption and increasing efficiency has become a goal that both traditional refineries and newly built integrated projects strive to achieve. Experts say that the transformation, which is like thousands of troops trying to cross a narrow bridge, will cause congestion throughout the entire industry chain.

Hot Topic 5: The industry is about to enter a new phase of rapid expansion, on a scale far greater than before. China entered a period of capacity expansion in 2019, and 2020 will see the most intense wave of project commencements; numerous large ethylene projects and propane dehydrogenation projects will go into operation this year. Therefore, if the pandemic has no significant impact on the plants set to begin operations this year, propylene and ethylene are expected to see a peak in production this year.

Hot Topic 6: The sources of competitive pressure in the ethylene and propylene industry chains differ between domestic and external factors. In the ethylene industry, competitive pressure mainly stems from the development of low-cost, lightweight raw materials for ethylene produced abroad. Propylene industry: Competitive pressure mainly stems from the development of diverse domestic raw materials and an overly rapid pace of capacity expansion, with relatively little external pressure.

Hot Topic 7: Structural contradictions remain prominent, and there is an urgent need to improve the level of high-end development and differentiation. The presence of prominent structural contradictions is indicated by the \"low\" levels of both industry self-sufficiency and utilization rates. For the downstream sector of the domestic olefin industry, there are mainly two issues: lack of cost competitiveness and performance shortcomings.

Hot Topic 8: Global efforts to address plastic pollution are affecting demand for plastics in downstream industries. Hot Topic 9: The pandemic has introduced uncertainty into future development, prompting multinational petrochemical companies to significantly cut back on capital expenditures, resulting in the cancellation or postponement of certain projects. Low oil prices lead to changes in the relative competitiveness of different routes/regions, and investment trends may change.

In this regard, private enterprises are indeed more competitive than the Big Three oil companies