China's slowing economic growth to pressure existing petrochemicals plants in Southeast Asia, projects scheduled to start post-2017; competitiveness of existing plants in Southeast, Northeast Asia could be affected without imposition of import barriers
December 5, 2013 (press release) – The slowdown in the economic growth of China could have significant effects on the Asian economy. The situation in China could exert a lot of pressure not only on refinery and petrochemicals projects scheduled to start after 2017 in southeast Asia (SEA) but also on existing plants. The competitiveness of existing plants in SEA and northeast Asia could also be affected unless import barriers are implemented. This is because the cost of ethylene in US plants post-2017 will only be around $300-400/tonne, whereas the price in SEA will be about $900-1200/tonne. There are also concerns about whether the existing petrochemical capacity in China can be absorbed by the market given that the country is already in surplus and already an exporter of some chemicals and polymers like polyvinyl chloride (PVC). In a global environment of weaker economic growth, this situation could significantly hamper the competitiveness of countries with inferior economies of scale. A graph shows the changes in polyvinyl chloride (PVC) supply, demand and other statistics in China in Jan-Sep 2011, 2012 and 2013. Demand increased by 2% while local production went up by 12%; recycled imports dropped by 74%; virgin materials import declined by 17% and exports grew by 55%. Original Source: ICIS Chemical Business, http://www.icis.com/, Copyright Reed Business Information Limited 2013.