WORLD OIL RALLY BOOSTS CHINA'S PETROCHEM FIRMS
Date: 24-May-99
Country: China
The rally on the world's oil market this year had sparked a surge in the prices of a range of petrochemical products in China, while the impact on listed firms' production costs remained limited, the official newspaper said.
"The rise in crude oil prices triggered an advance in the prices of petrochemical products and that is benefitting domestic petrochemical enterprises," it said.
Qilu Petrochemical Co Ltd , one of China's largest chemical companies, had enjoyed a rise in the prices of its plastics, rubber and polyvinyl chloride (PVC) since the beginning of this year, the newspaper said.
The prices of Chinese firms' synthetic fibres and resin also rose sharply, it said.
Qilu's PVC price had soared 20 percent this year, the newspaper said, adding that Qilu had been operating at full capacity this year and targetted its 1999 ethylene output at 480,000 tonnes.
The newspaper said the prices of domestic petrochemical products were likly to rise further as the state's massive investment in infrastructure construction should help stimulate demand.
The investment, started last year and aimed at boosting a slowing economy, should begin to show effects on petrochemical prices in the second half of this year, it said.
The PVC prices of Wuhan Phoenix Co Ltd's , a big petrochemical firm in the central Chinese province of Hubei, has climbed to 5,500 yuan ($664) from 4,500 yuan earlier this year, the newspaper said.
Phoenix produced more than 20,000 tonnes of PVC in the first quarter of this year, which was higher than its output in the first half of 1998, it said.
It quoted Lu Yiping, head of Shanghai Petrochemical Co Ltd , as saying the higher global oil prices had only a small impact on the firm's costs and the company would expand ethylene output to 550,000 tonnes this year.
The increase in the prices of domestic petrochemical products outpaced the rises in international oil prices, the newspaper said.
It quoted Lu as saying he was confident China's petrochemical industry could "walk out of the deep valley" this year.
But the prices of oil products such as gasoline and diesel were little affected because of Beijing's long protection of the weak domestic crude oil producers, whose costs are far higher than those of foreign counterparts, it said.
China's crude oil prices are still much higher than globaL prices.
Some industry analysts showed pessimism over the prospects of the domestic petrochemical sector this year, saying the rally on the international market might only be a temporary rebound, the newspaper said.
The analysts also said OPEC was likely to take advantage of higher prices to expand output, which could eventually lead to a renewed weakening of oil prices, the newspaper said.
