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This post was last edited by yinkuilin6868 on 2016-6-6 08:43. Last year, China’s refining capacity was around 710 million tons, with an overcapacity of about 100 million tons. “\"Capacity reduction\" will be one of the key focuses in the development plan for China’s petrochemical industry over the next five years. “During the 13th Five-Year Plan period, the reduction rate for refining capacity is initially set at 10%-15%. Current status of refining capacity: On June 2, Bai Yi, deputy director of the Petroleum and Chemical Industry Planning Institute, said at the 2016 China Petrochemical Development and Innovation Forum that during the 13th Five-Year Plan period (2016–2020), “capacity reduction” would be one of the key aspects of the supply-side reform in the petrochemical industry. According to Bai Yi, in the draft 13th Five-Year Plan for the petrochemical industry, refining is considered a typical example of overcapacity within China’s petrochemical sector. The target is to reduce refining capacity by 10%-15%, and this applies to those refineries that are small in scale, have an unsuitable supply of raw materials, or produce oil products that do not meet quality standards. The \"2015 Report on the Development of the Oil and Gas Industry at Home and Abroad\" released by the PetroChina Economic and Technical Research Institute shows that as of the end of last year, China’s refining capacity was around 710 million tons, with an excess capacity of 100 million tons. Methanol, another important chemical product, is considered to be facing temporary overcapacity; the target for reducing production capacity is set at 30%-40%. Currently, China’s methanol production capacity amounts to 64 million tons, resulting in an overcapacity rate of 40%. Bai Yi said that currently, the domestic petrochemical industry is faced with both excess capacity and inefficient production capacity; supply-side reform will also be part of the 13th Five-Year Plan. However, the product structure of the petrochemical industry is complex, and it cannot be fully described simply in terms of excess or shortage. What causes the surplus? Bai Yi said that over the past decade, the domestic petrochemical and chemical industries have developed rapidly, but due to external factors, the annual growth rate has varied significantly. Once the growth rate becomes too fast and becomes disconnected from GDP growth, the direct result is the creation of excess capacity. In addition, many industry experts believe that the overcapacity in the petrochemical sector is also due to the irrational investment planning by some companies, which leads to waste of resources and low efficiency. Analysts at Longzhong Petrochemical, who specialize in refined oil products, believe that the overcapacity in oil refining is related to the current pricing policy for refined oil products. The minimum price floor encourages processing companies to increase their production capacity, which to some extent hinders supply-side reforms and efforts to reduce capacity. Market experts say that the overcapacity in China’s refining industry is primarily driven by the simultaneous rise in imports and production volume of small and medium-sized \"teapot\" refineries. Previously, state-owned refineries had been operating at full capacity for many years, with little reduction in crude oil processing volume. In contrast, private refineries increased their crude oil processing volume by nearly 30% compared to the same period in 2015. Currently, some refineries are facing high levels of inventory, which may force them to reduce their operating capacity, leading to a decline in demand for crude oil. Wu Haijun, general manager of Shanghai Sinopec Petrochemical Co., Ltd., believes that the current overcapacity in the petrochemical industry is due to the irrational investment planning of some companies. Liu Xunfeng, chairman of Shanghai Huayi Group Co., Ltd., said that chemical industry companies in China are relatively scattered, which leads to resource waste and low efficiency; corporate consolidation will be a trend over the next five years. Successful transformation or outdated? “For petrochemical companies, the 13th Five-Year Plan represents an opportunity; failure to undergo successful transformation could lead to their bankruptcy. In the process of reducing overcapacity, restructuring, integration, and cooperation will become key. ”Liu Xunfeng, chairman of Shanghai Huayi Group Co., Ltd., said. As a representative of international companies, Lai Wenhua, senior consulting advisor and director of DuPont’s Greater China operations, said that the merger between DuPont and Dow could serve as a model for domestic enterprises. “This merger is also a preparation for the subsequent split. During the merger process, DuPont does not wait until a company is in complete loss before seeking a merger; instead, it focuses on the ratio of the company’s fixed assets to its current assets. Secondly, preparations are made for vertical and horizontal splitting during consolidation. ”Lai Wenhua said. Finally, according to Bai Yi, in the draft 13th Five-Year Plan for the petroleum and chemical industry submitted by the Petroleum and Chemical Industry Planning Institute, the target growth rate for the industry’s development has been set at 6.5%, matching the target growth rate of China’s GDP for the first time. In the petrochemical industry’s 12th Five-Year Plan, the target annual growth rate for the sector was set at 10%.