Petrochemical industry needs to pay attention to three major issues

According to the latest report from the China Petroleum and Chemical Industry Association, the national oil and chemical industry showed strong performance in August. Key highlights include robust production growth and continued expansion in exports. The sector’s economic operations exhibited five main characteristics: first, significant progress was made in oil and gas exploration, with steady energy output; second, agricultural chemical production grew steadily, but fertilizer exports dropped sharply, leading to higher inventory levels; third, the coal chemical industry continued to develop; fourth, new materials saw rapid growth; and fifth, traditional chemical industries maintained stable production with strong demand. In August, the industry achieved a total industrial output value of 604.18 billion yuan, representing a 34.9% year-on-year increase. This marked a 16.3 percentage point rise compared to the previous year. The chemical industry alone contributed 311.34 billion yuan, up by 29.4%, while the oil and natural gas extraction industry reached 105.2 billion yuan, growing by 47.3%. The oil refining sector produced 175.79 billion yuan, an increase of 37.4%, and special equipment manufacturing rose to 11.84 billion yuan, up 50.5%. The market remained relatively stable, with prices staying high overall. The ratio of production to sales stood at 97.2%, slightly down from the same period last year. In terms of exports, the industry's delivery value reached 36.92 billion yuan, a 20.1% increase year-on-year, adding 6.5 percentage points compared to the previous year. From January to August, the total output value of the industry reached 4.444 trillion yuan, up 32.9% year-on-year, with a product sales rate of 98.3%, an increase of 1.49 percentage points. However, challenges remain. Some industries have seen a notable slowdown in production growth, and export growth has declined sharply. Prices are still rising significantly, and global financial markets continue to face instability. The world economy is not optimistic, and uncertainties in the industry's operations require close attention. First, ongoing turbulence in international finance could further slow global economic growth. The bankruptcy of Lehman Brothers, the fourth-largest U.S. investment bank, has worsened financial market volatility and increased risks for the global economy. Economic growth in the U.S. and Western Europe may slow even more, impacting China's exports and investments. Second, product price increases remain high. In August, driven by rising costs, domestic petroleum and chemical product prices were generally elevated, with a large year-on-year increase. Of the 168 products closely monitored by the association, 136 saw price hikes (81%), while 32 experienced declines (19%). According to the National Bureau of Statistics, the ex-factory price index (PPI) for industrial products rose 10.1% year-on-year, while raw material, fuel, and power purchase prices surged by 15.3%. Third, production growth in some sectors has slowed significantly, and export growth has dropped sharply. From January to August, synthetic resin output fell by 10.6 percentage points, synthetic fiber production dropped by about 14 percentage points, ethylene output decreased by 16 percentage points, and fertilizer output fell by 5.7 percentage points. Meanwhile, composite materials exports dropped by 14 percentage points, paints and pigments exports fell by 23.5 percentage points, fertilizers by 55.7 percentage points, and rubber products by 14.5 percentage points. If this trend continues, export growth will likely decline further, which could have serious negative impacts on the industry. Looking ahead, the fourth quarter may bring intensified global financial turmoil and a further slowdown in the world economy, worsening the external environment for the industry. However, the ability of the oil and chemical sectors to manage risks has improved significantly. With the current global economic climate, international crude oil prices have begun to decline and are expected to stay near $100 per barrel, offering hope to domestic refineries. As the government adjusts its macroeconomic policies, the industry is expected to maintain relatively stable growth in the fourth quarter. From September to December, the growth rate of total output value may slow, with an annual increase of around 28%. Sales revenue is projected to grow by about 27%, and if oil prices remain stable, the refining industry may turn profitable in October. Import and export trade is expected to continue growing rapidly, by approximately 35%, while fixed asset investment could rise by 27%. Major chemical product output is anticipated to increase between 5% and 20%.

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