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At the 2024 Petrochemical Industry Development Conference, Sun Weishan, vice president of the China Petroleum and Chemical Industry Federation, released the capacity warning and investment directions for key petrochemical products in 2024.

The report points out that structural contradictions in China's bulk petrochemical products have emerged. From the supply side, the production capacity and output of bulk petrochemical and chemical products in China have both increased significantly. According to the monitoring data of the Federation, in 2023, the total production of major chemicals in China was approximately 720 million tons, increasing by about 6% year-on-year, while the growth rate in 2022 was a year-on-year decrease of about 0.4%. With the commissioning of integrated refining and chemical projects and the downstream "chain extension" and "chain supplementation", petrochemical raw materials and synthetic resins are in a peak period of expansion. The production capacity of traditional chemical basic raw materials continues to expand. In addition, the production capacity of propylene oxide and epichlorohydrin has increased significantly. The production capacity of raw materials such as BDO and calcium carbide has increased. The production capacity of new energy materials has increased sharply. The production capacity of traditional synthetic rubber products has also increased. The output of chemical fertilizers has increased significantly. From the demand side, the consumption demand for petrochemical products has been steadily increasing. The demand for ethylene, propylene, propylene oxide, epichlorohydrin, acetic acid, lithium iron phosphate, a cathode material for new energy batteries, polyester - the textile and garment industry chain, and the consumption of chemical fiber raw materials has all increased.

The report holds that the production capacity and output of major petrochemical products in China have grown rapidly, and the market supply capacity has been continuously enhanced, which has well supported the development of the national economy. However, due to a large amount of investment in bulk basic raw materials and mid-to-low-end chemicals, and the concentrated release of production capacity, the problem of unbalanced development has become increasingly prominent, and structural contradictions have intensified.

It is worth noting that the investment enthusiasm in China's petrochemical and chemical industry is high, and the investment risks need to be paid attention to. The report points out that the industry is still in a peak period of investment at present. In the coming years, the production capacity of bulk petrochemical and chemical products will continue to grow rapidly. New projects for products such as ethylene and ethylene glycol were constructed in a concentrated manner, and production capacity grew rapidly. The situation of overcapacity in products such as propylene, polypropylene, purified terephthalic acid (PTA), caprolactam, propylene oxide, epichlorohydrin, epoxy resin, butadiene rubber, calcium carbide and 1, 4-butanediol (BDO), which are already in excess supply, will become increasingly serious. There are also signs of overinvestment in some high-end products such as polyolefin elastomers (POE) and lithium iron phosphate.

The report holds that overheated investment will seriously affect industry profits. According to data from the National Bureau of Statistics, the petrochemical industry achieved a total profit of 873.36 billion yuan in 2023, a year-on-year decrease of 20.7%. It is precisely because of the significant drop in the prices of crude oil, natural gas and the vast majority of petrochemical products that the entire petrochemical industry witnessed a situation of "increased production and sales but no increase in profits" in 2023. According to statistics, the prices of the major bulk petrochemical and chemical products under close monitoring all declined in 2023. Among them, propylene, PTA, methanol, ethylene glycol, caprolactam, polypropylene, polyvinyl chloride, butyl rubber and calcium carbide have suffered production losses for two consecutive years. The overly rapid growth of future production capacity will lead to increasingly fierce competition and make it more difficult for enterprises to make profits. Therefore, the report suggests guiding enterprises to make precise investments and unswervingly promoting the high-quality development of incremental assets. This requires controlling the centralized construction of basic bulk chemicals and strengthening the development of high-end and differentiated varieties and grades. It is also necessary to accelerate the innovative development of new chemical materials and high-end specialty chemicals such as high-end polyolefin plastics, engineering plastics and special engineering plastics, polyurethane materials, fluorosilicone materials, special rubber and elastomers, high-performance fibers and composite materials, functional film materials, electronic chemicals, high-performance coatings, and high-performance adhesives. In addition, strong support should be given to the development of biochemical engineering.

Sun Weishan suggested that on the one hand, the industry should enhance the statistics, monitoring and early warning of production capacity. At present, we should be vigilant against the signs of overcapacity in the chemical industry, strengthen the monitoring of capacity expansion of hot chemical products, and avoid blind investment in a rush. It is suggested that the China Petroleum and Chemical Federation, in collaboration with various professional associations and key enterprises, establish a capacity early warning working group, set up a regular capacity monitoring and early warning mechanism, and improve the release of early warning information. On the other hand, it is necessary to strengthen the review of the advanced nature of new production capacity projects. For all newly-built petrochemical projects, the advanced nature and profitability of the project have been analyzed. This is basically the content compiled for the project to pass the review. To avoid low-level repetitive construction of the project, it is suggested that a third party organize experts to review the advanced nature of the project before its commencement.