Sinopec's Petrochemicals Output Fell Across All Segments In Q109

July 2, 2009 - PRLog -- In March 2009, China’s petrochemicals industry registered 26.3% month-on-month (m-o-m) growth, according to the China Petroleum and Chemical Industry Association (CPCIA). However, total turnover for the sector, including oil and gas extraction, production of refined oil products and manufacture of chemicals, was down 8.4% year-on-year (y-o-y) to CNY498.4bn (US$73.06bn). The CPCIA stated that negative growth was expected to continue in Q209. Nevertheless, the sector is still relatively robust, and the five leading petrochemicals companies – China National Petroleum Corporation (CNPC), China Petroleum and Chemical Corporation (Sinopec), China National Offshore Oil Corporation (CNOOC), Sinochem and Shaanxi Yanchang Petroleum – saw their combined profits soar 160% m-o-m and 13.2% y-o-y in March to CNY28.3bn. In Q109, Sinopec reported an 85.1% y-o-y rise in profits to CNY11.22bn (US$1.64bn). It attributed the strong performance to the government's reforms in prices and taxes on oil products sold in the domestic market and the government’s economic stimulus programme.

Its refining business also reversed its losses. However, Sinopec's petrochemicals output fell across all segments in Q109, with ethylene production down 12.2% y-o-y to 1.49mn tonnes. In Q109, PetroChina posted a net profit of CNY18.95bn (US$2.79bn), down 35.3% y-o-y. It produced 205.7mn barrels of oil, down 5.7% y-o-y, but its marketable natural gas output rose 7.9% y-o-y to 523.4billion cubic feet (bcf).

Its refinery throughput fell 14.6% y-o-y to 185.4mn barrels. Ethylene production fell 6.5% y-o-y to 663,000 tonnes in the quarter.

It is believed that demand will have improved in H209, with Chinese petrochemicals producers expected to post improvements in earnings and turnover due to cheaper feedstock and improved domestic demand.

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This will be supported by the government’s economic stimulus programme, although the specifics regarding petrochemicals are due to be announced by the end of Q209. Most Chinese petrochemicals producers have said that by Q209 they had turned the corner as far as turnover and profits were concerned. Although H209 will be an improvement on the poor performance seen in H208, levels of demand growth are not forecast to return to 2007 levels until 2010 at the earliest. A positive factor is the low price of naphtha compared to 2008 levels, caused by a fall in oil prices. This will go a long way to support petrochemicals margins. However, feedstock prices are rising and are recovering from the huge declines seen in Q408 due to a rise in oil prices caused by increased demand and lower refinery operating rates.

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