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One of the Trends: High Oil Prices Driving Investment Back to Rationality
As major oil-consuming countries and regions experience stable economic growth, international oil prices are expected to remain at elevated levels, which will continue to support petrochemical product prices. Additionally, rapid economic expansion in Asian developing nations is fueling rising oil demand, keeping prices high and further boosting the cost of petrochemicals. The ongoing expansion of downstream industries also plays a role in increasing both demand and pricing for these products.
With crude oil prices remaining high, bio-based alternatives like fuel ethanol and biodiesel have become popular investment areas in recent years. However, as local companies rush into these sectors, some policymakers have introduced regulations to cool down the overheated new energy market. Industry experts believe that the investment momentum seen in oil refining, ethylene production, and coal chemical industries will slow down in the second half of the year. Over time, petrochemical companies are becoming more aware of their social and environmental responsibilities, signaling a shift in priorities.
Trend 2: Mergers and Acquisitions Accelerate as Technical Barriers Rise
Mergers and acquisitions in the petrochemical industry are gaining momentum, with multinational corporations expanding their presence in China through strategic investments and setting up R&D centers. Meanwhile, Chinese companies such as Sinopec, CNOOC, and others have been actively pursuing overseas opportunities since 2005, accelerating their global expansion through acquisitions and restructuring. This has increased their influence within the industry.
Under the World Trade Organization framework, traditional tariff barriers are diminishing, but technical trade barriers—such as regulations, standards, and conformity assessments—are becoming more prominent. For China’s petrochemical industry, addressing these challenges is critical.
For example, the EU's REACH regulations require over 30,000 chemicals and their downstream products to be registered before entering the European market, with significant testing costs borne by manufacturers. It is estimated that full implementation of REACH could increase China’s export costs to the EU by 5% and import costs by 6%. This may lead to a 10% drop in total China-EU chemical trade, a 0.4% decline in China’s chemical production, and the potential loss of 200,000 jobs in the sector.
Trend 3: Sustained Growth Exceeding 20% in 2007
According to the China Petroleum and Chemical Industry Association, with high oil prices and strong domestic economic growth, petrochemical product prices are expected to remain stable in 2007, leading to increased industry profits. This trend is likely to continue, maintaining a growth rate of over 20%.
The upgrading of domestic consumption patterns is driving industrial restructuring and urbanization, which in turn boosts economic and energy demand. The transportation sector is growing rapidly, with increased car ownership and higher oil usage in agriculture, construction, and chemical industries. Urbanization is accelerating, and the development of alternative and renewable energy sources is progressing. All of these factors contribute to rising demand for oil and gas.
Additionally, industries such as construction, textiles, electronics, and automotive manufacturing have significantly contributed to the petrochemical sector. In 2006, China produced 25.29 million tons of synthetic resin but still imported 23.93 million tons. Demand for synthetic resin is expected to rise further in 2007. Domestic paint demand is projected to grow by more than 20%, while synthetic fiber output was below 50% of total demand. In the electronics sector, supporting materials and information chemicals are expected to see growth of over 18% in 2007.