Demand drives the rapid growth of the petrochemical industry should be alert to excess capacity

“In 2007, the growth rate of the petrochemical industry will exceed 20%.” The China Petroleum and Chemical Industry Association recently made the above forecast.

Although this development rate is even more optimistic than the "rapid growth" of 18.3% in 2006, experts in the industry have warned that due to the high growth in investment in fixed assets of China's petroleum and chemical industries in recent years, the pressure on energy, resources, and the environment has been exacerbated. Some sub-sectors will experience a crisis of overcapacity. At the same time, due to the start-up of production of a number of world-class devices in the Middle East from 2008 to 2010, total production capacity in Asia may be in surplus. This effect will also affect China's petrochemical industry.
Domestic demand boosts profit growth The petrochemical industry association recently predicted the development trend of China's petrochemical industry in 2007. As the international oil price will continue to be high, and domestic economic development will accelerate market demand, domestic chemical product prices will not rise and fall in 2007. Industry profits will also maintain a certain growth.
In 2007, the upgrading of domestic consumption structure will drive the upgrading of industrial structure and urbanization. Domestic demand will lead to strong economic growth and energy demand will continue to grow. The continuous development of the transportation industry, the rapid increase in automobile consumption and ownership, the increase in oil use in the agriculture, building materials and chemical industries, and the increase in the demand for natural gas, all will drive demand for oil and gas.
The petrochemical association said that in 2006, 25.29 million tons of synthetic resin was produced in the country, and 23.93 million tons were still imported. The demand is expected to increase further in 2007; the demand for domestic paint will maintain a growth rate of more than 20% in 2007; supporting synthetic materials and information chemicals for the electronics industry. In 2007, it will increase by more than 18%.
New production capacity will fill the market gap. The industry is expected to be optimistic about the development of the industry but the problem cannot be ignored. On the one hand, overproduction of some traditional products has occurred. On the other hand, the production of new chemical materials is difficult to meet the strong demand brought about by the rapid economic development. Industry experts believe that maintaining the steady development of the petroleum and chemical industries, preventing major ups and downs, and doing everything possible to achieve the goal of energy conservation and emission reduction are two key issues that the petrochemical industry must pay attention to.
Li Yongwu, president of the China Petroleum and Chemical Industry Association, also pointed out that in recent years, the petroleum and chemical industries have caused an upsurge in capacity expansion. In 2006, investment in fixed assets increased by 29.37% year-on-year. Especially in regions with rich energy and resources in the central and western regions, large-scale chemical bases are being planned and constructed. This has led to a certain impact on the industrial efficiency of the petroleum and chemical industries, and increased pressure for energy conservation and environmental protection.
"As for the petrochemical industry, the rapid growth of fixed asset investment and the existence of many problems in product structure adjustment are still internal issues, and the impact of pressure from the international market may be even greater," the expert also pointed out.
According to the forecast of the United States Chemical Markets Association (CMAI), from 2005 to 2009, the Middle East will have a new capacity of ethylene production of more than 14 million tons per year. If the 80% operating rate is adopted, the annual new production will not be less than 10 million tons, and it is estimated that 70% to 80% of them will be exported for export. This means that the Middle East petrochemical products will have 7 million to 8 million tons of new production each year to enter the world, especially in Asia, when Asia Petrochemical Corporation will enter the era of survival in competition with the Middle East companies. Even if it does not consider the production in the Middle East, some Asian countries in recent years are mainly world-class projects such as China, Thailand and Singapore that have been put into operation or will be built. They will also fill the Asian petrochemical market gap in 2010.
CMAI believes that due to the fact that the cost of products produced from local rich ethane raw materials is lower than in other parts of the world, and with the emphasis on economies of scale in the construction of petrochemical plants, the rapid development of the Middle East petrochemical industry will surely have a great impact on the global petrochemical market. The impact on the China petrochemical market and the impact of the petrochemical industry cannot be underestimated.

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