Report: Petrochemical sector rebounds

China's petrochemical sector showed signs of stability and recovery last year despite rising global uncertainties, an industry report showed.

Its output, together with the trade volume of petrochemical products, rose in 2023 amid an intricate landscape, laying the groundwork for robust prospects in 2025, said Fu Xiangsheng, vice-president of the China Petroleum and Chemical Industry Association, during a news conference in Beijing on Thursday.

The sector has contributed substantially to both domestic energy security as well as food security, with increased output of refined oil products, fertilizers and pesticides, he said.

According to the association, exports of refined oil products, including gasoline and diesel, rebounded strongly after three years of decline, with a total export volume of 41.98 million metric tons in 2023, a 21.9 percent increase year-on-year.

National fertilizer exports reached 31.46 million tons, up 27.2 percent year-on-year, while pesticide exports amounted to 2.46 million tons, up 9.7 percent year-on-year, it said.

After two consecutive years of decline, China's crude oil imports rapidly rebounded last year, reaching 564 million tons, up 11 percent year-on-year, it said.

Petrochemical product output also witnessed rapid recovery, with the output of refined oil products reaching 428 million tons, an increase of 16.5 percent year-on-year, surpassing the previous year's growth rate by 13.3 percentage points.

The total production of major chemicals, including ethylene, sulfuric acid, and fertilizers, turned positive last year, growing by about 6 percent year-on-year to 720 million tons, according to data from the association.

Despite the growth in output as well as import and export volume, Fu stressed the need for increased production efficiency to improve profits, highlighting the sector's potential for further improvement.

While profits in the petrochemical sector have not kept pace with production last year, there is considerable space and potential for improving efficiency, said Fu.

China is on course to becoming a petrochemical heavyweight, he said.

While energy and chemical enterprises are making new contributions to ensure energy security amid global uncertainties and conflicts, concerns about severe overcapacity still persist, said Lin Boqiang, head of the China Institute for Studies in Energy Policy at Xiamen University.

China is already grappling with distillation overcapacity, and it is necessary for the industry to prioritize structural optimization and increased investments in high-end development rather than solely focusing on expanding scale, said Lin.

Fu also said that the severity of overcapacity must be duly acknowledged.

"A significant influx of investments has geared toward expanding scale and increasing output in the past few years, with limited proportion of these investments allocated to structural optimization and high-end advancements," he said.

"This disproportionate focus on sheer scale has resulted in the overcapacity situation to some extent, underscoring the necessity for a reevaluation of strategies to achieve a more balanced and sustainable industry landscape."

On the other hand, overcapacity, together with weak demand for commodity chemicals and China's rapidly growing industries like solar and electric vehicles, are also the key drivers for companies to extend into high-end, high performing materials, said Kelly Cui, Shanghai-based principal analyst with consultancy Wood Mackenzie.

Chinese oil refiners and petrochemical companies, including State-owned oil giant China Petroleum and Chemical Corp, or Sinopec, are already investing to produce high-end chemicals for solar panels and lithium-ion batteries, eyeing greater market share from the growing demand for energy transition technologies.

With an emphasis on high-quality development, green and low-carbon transformation, and digital upgrades, the association anticipates the overall situation of the petroleum and chemical industry to relatively improve in the first half of this year, compared to the same period in 2022.

According to the International Energy Agency, the global petrochemical industry, essential to the production of clothing, tires, detergents, fertilizers, and countless other everyday products, is currently undergoing a momentous period of transition.