Sinopec Puts Up $4.4 Billion to Curb China’s Dependence on Foreign Ethylene

China Petroleum & Chemical Corp. (Sinopec) announced a major new project to make ethylene, as the nation moves to sharply ramp up its capacity of the key chemical ingredient in plastics manufacturing under Beijing’s attempts to wean the sector off imports.

The new project will see Sinopec invest 28.8 billion yuan ($4.4 billion) on an ethylene cracker with annual capacity of 1.2 million tons in the northern city of Tianjin, according to a statement (link in Chinese) posted Friday on the Shanghai Stock Exchange. The project is awaiting regulatory approval.

Ethylene is a major product processed from crude oil. In China, over half of the chemical is used to make polyethylene, a key ingredient for plastics used in a wide range of everyday goods and home appliances. As the Chinese government calls for reduced dependence on chemical imports amid rising geopolitical tensions, state-owned and private oil firms are racing to boost domestic capacity in the world’s top chemical consumer.

Energy consulting firm Sublime China forecasts the country’s ethylene capacity will more than double by 2025 to 70 million tons annually, with at least 43 domestic oil companies mulling the addition of ethylene crackers. The forecast is sharply higher than a projection for 50 million tons of total capacity by 2025 made in March by an expert at another oil giant, China National Petroleum Corp.

The country consumed 54.36 million tons of ethylene last year, up by 8.5% from 2018. China’s domestic production capacity reached 28.7 million tons last year, with domestically produced ethylene accounting for just under half of total domestic consumption.

Sublime China estimates around 6 million tons of new ethylene production capacity will come on stream this year, bringing the country’s total capacity to 34.7 million tons.

As producers at home ramp up capacity, the country’s production is expected to meet 70% of domestic demand by 2025, according to a report by Cinda Securities. Despite the aggressive addition of new capacity at home, however, China is expected to continue dominating ethylene derivative imports, said energy consulting company IHS Markit.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Yang Ge (geyang@caixin.com)

Support quality journalism in China. Subscribe to Caixin Global starting at $0.99.