China Olefins Market E-News 1408

China Olefins Market E-News
VOL.1 Issue 8, August,29, 2014
Copyright Guangzhou CCM Information Science & Technology Co.,Ltd
CCM Newsletter
China Olefins Market E-News 1408
Contents
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Headline
Editor's Note
China Olefins Cost Analysis
Current situation & forecast
China progresses in shale gas exploration and exploitation
Raw materials of olefins in China

Naphtha
Import analysis of naphtha in China in June 2014
Coal
Methanol
Import analysis of methanol in China in June 2014
China Olefins Market Review

Price analysis
Supply analysis
Operating situation of China's ethylene plants
China Olefins News Express
CDT to withdraw from coal chemical industry

Exploration of Chinas coal enterprise transformation based on current development situation of coal chemical industry in Anhui
18
Province
20
No.6 furnace of Sinopec Qilus olefins plant reconstructed successfully
22
Overcapacity beckons as China adds PDH capacity
26
Sinopec exports PP technology to US
27
New ethylene refined catalyst upgrades CTO process
28
CDT spins off coal chemical business valued at USD16.21 billion
28
Hazard Analysis and Security Technology Research on MTO Device inspected and accepted by Sinopec
29
Sinopec Maomings new chemical products hit gloomy market
30
Zhongtian Hechuang comprehensively accelerates construction of coal deep-processing demonstration projects
30
CNPC Daqing develops and produces PE-RT to meet market demand
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31
Flash News
Yulin Shenhua finishes periphery grounding system for polypropylene device
Lanzhou PetroChina again encounters fire caused by propylene leakage
Shenyang Blower Works makes breakthrough in new pulverized coal gasification technology
China Shenhua to take over Datang Keshiketeng's SNG business
Sinopec Wuhan produces coating material J47-15
Sichuan's laboratory for shale gas inaugurated in Chengdu City
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Headline
Aug. 2014 The production cost of methanol process made a comeback after sharp declines. Meanwhile, the production cost of
CTO process stayed stable and presented the strongest cost competitiveness.
H1 2014 China has made some significant achievements in the exploitation of shale gas. In addition, Chongqing Fuling shale gas
has been successfully used in the production of chemical products at Sichuan Vinylon Works, which greatly reduces its production
costs.
Aug. 2014 Asia increases the supply of naphtha and Asian traders are anxious to market the naphtha. Specifically, Russian
exporters for naphtha haven't been affected by the sanction for the moment. Meanwhile, China's demand for naphtha has not
encountered a noticeable recovery, and thus the price trend of naphtha in China remains stable in this month.
Aug. 2014 Shenhua Group announced that it would reduce the production of coal in 2014. Meanwhile, the price downturn of
Bohai-Rim steam coal slowed down. However, as there are still many problems existing in the coal industry, steam coal is not
expected to witness sustained development.
Aug. 2014 The supply of China-made methanol was reduced, as the government enhanced the transportation management on
dangerous chemicals. Also, the import price of methanol saw increases due to the supply shortage from Southeast Asia.
Aug. 2014 The CFR prices of ethylene and propylene in China fell from highs. It is predicted to hold this level in Sept.
Aug. 2014 The olefins production facilities ran steadily as a whole.
The news that CDT transferred all its coal chemical businesses aroused a hit throughout the coal chemical industry in China. Many
experts thought that it is the false choice on the production base of raw materials and the problems of talents and technology that
brought losses to the enterprises in coal chemical business. Meanwhile, the main business, thermal power generation witnessed
improvement. Therefore, this business transfer is actually CDT's strategic adjustment.
Aug. 2014 CCM continues to follow the current development situation of the coal chemical industry in Anhui Province, one of the
largest coal provinces in China, and hopes to explore some development ideas from China's domestic coal enterprises for
transforming the coal chemical industry.
Aug. 2014 The cracking furnace of the olefins plant of Sinopec Qilu was reconstructed, mainly to get light raw materials of
ethylene. In this article, CCM will report the detailed reconstruction of Sinopec Qilu's olefins plant and based on that discuss the
development of China's petroleum-based olefins devices in the future - to separate raw material, ethane from imported natural gas.
Second half of Aug. 2014 CCM learned that Zhejiang Satellite is commissioning a PDH project. It is predicted that there will be
five PDH production facilities put into operation in China during H2 2014. In this article, CCM analyzes the prospects of these PDH
projects by assessing the profit, supply and demand situations.
15 Aug. 2014 Sinopec reverses to export PP technology to the US, symbolizing that its technology progresses to a new level.
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Editor's Note
In Aug. 2014, the fact that CDT followed other central enterprises such as China Guodian and CNOOC to withdraw from coal
chemical industry aroused a hit in China. The coal chemical industry seems to involve in a big trouble. Is MTO also confronted with a
turnaround? Though the debate on the central enterprises to shake off related businesses continues, the construction of Huainan
Coal Chemical Base is progressed on schedule. How do the enterprises in the base achieve transformation and upgrading in such
a gloomy coal market?
Meantime, traditional ethylene plants are still drawn back by high-price raw materials. However, Sinopec Qilu strives to seek for a
way to optimize the structure of raw materials and lower production costs. The No.6 furnace of its olefins plant was reconstructed
successfully in Aug. More notably, the reconstruction of Sinopec Qilu's No.6 furnace is targeted to give play to ethane extracted in
CNCCO Qingdao's LNG terminal. This maybe a way for traditional ethylene plants to lower production costs.
However, taking ethane extracted from LNG as raw material presents some limitations, as the LNG terminals located in China's
eastern part, the coastal areas cannot serve the olefins plants in central and western China. Comparatively, shale gas in progress
may be a solution to solve the problem. Currently, shale gas exploited in Chongqing's Fuling is applied in the chemical production of
Sichuan Vinylon Works. Nevertheless, the exploration of shale gas in China is still at a preliminary stage. In the future, with more and
more shale gas exploited, can it be used to produce olefins and related downstream derivatives?
Regarding the strategy to enrich raw materials for olefins, the PDH projects in eastern China go in advance. Three Chinese
enterprises such as Zhejiang Satellite are expected to put their PDH projects into operation in H2 2014. Then China's propylene
capacity will be relieved in a large scale. However, will the market suffer from overcapacity? How do the PDH projects work?
The above hot topics in China olefins market will be explored and reported by CCM in detail in this journal, China Olefins Market ENews 1408. Please pay close attention.
The RMB/USD exchange rate in this issue is USD1.00=RMB6.1681 on 1 Aug., 2014, sourced from the People's Bank of China. If
you would like to cover any specific topics or investigate any covered subjects in more details, please contact us on +86-20- 3761
6606, or econtact@cnchemicals.com.
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China Olefins Cost Analysis

Current situation & forecast
Aug. 2014 The production cost of methanol process made a comeback after sharp declines. Meanwhile, the production cost of
CTO process stayed stable and presented the strongest cost competitiveness.
In Aug. 2014, Shaanxi Yanchang & China Coal Yulin Energy Chemical Co., Ltd. witnessed gradual increases in its sale of olefins
from coal and enlarged its impact on spot olefins, capturing attention in the market. Accordingly, four newly-launched coal-to-olefins
(CTO) projects will be progressed as scheduled in H2 2014. China is expected to further take the lead in CTO sector.
However, both China Shenhua Group Co., Ltd. and China National Coal Group Corporation reduced production to stabilize prices.
CCM learnt that recently the price of coal tended to pick up steadily, which indicated that the cost of raw material for CTO projects
would not decline largely and would even make a rebound as coal price increases.
According to CCM's olefins cost analysis model, as of 25 Aug., 2014, the production cost (tax included) of naphtha-to-olefins
process reached USD1,272/t, methanol process USD1,137/t and CTO process USD1,129/t. The production cost of naphtha-toolefins process witnessed slow declines, while that of methanol process made a comeback after sharp decreases. The CTO
process still presented the strongest cost competitiveness.
In Sept. 2014, the coal market will enter into its traditional peak period. Moreover, the supply of methanol in East China will be
reduced as the Chinese government enhances the transportation management on dangerous goods and the manufacturers in
Southeast Asia suspended production for maintenance. The supply of naphtha tends to increase, due to the weakened demand
from the US and Europe and a large influx of naphtha to Asia.
Therefore, it is predicted that in the next two months, the production costs of methanol and CTO processes will be stabilized while
that of naphtha process will continue the downturn.
Figure 1: Current situation and forecast on production costs of China olefins, Aug. 2013- Oct. 2014
Note: Taxes,income from by-products and financial depreciation expense included.

Source: CCM
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China progresses in shale gas exploration and exploitation

H1 2014 China has made some significant achievements in the exploitation of shale gas. In addition, Chongqing Fuling shale gas
has been successfully used in the production of chemical products at Sichuan Vinylon Works, which greatly reduces its production
costs.
In H1 2014, Fuling shale gas field of China Petrochemical Corporation (Sinopec) has entered into commercial development, and
significant breakthroughs were made in the exploration and development of shale gas in southern marine areas. However,
compared to the US, China's shale gas industry is still in a preliminary exploration phase.
According to data released by the Ministry of Land and Resources of the People's Republic of China (MLR), as of June 2014,
China has made achievements in shale gas exploitation. Some enterprises have also developed their own shale gas capacities,
such as Sinopec with 1 billion m3/a, China National Petroleum Corporation (CNPC) with 300 million m3/a and Shaanxi Yanchang
Petroleum Group Co., Ltd. (Yanchang Petroleum) with100 million m3/a.
Figure 2: Capacity proportion of shale gas by manufacturer in China, as of June 2014
Source: CCM
As of the end of April 2014, China has invested over USD2.43 billion (RMB15 billion) in shale gas exploitation and has completed
the drilling of 322 shale gas wells, including 108 investigating wells, 118 exploratory wells, 96 appraisal wells (horizontal wells).
Moreover, China has completed the 2D seismic exploration of nearly 19,139 km and the 3D seismic exploration of 1,451 km 2, and
has initially evaluated 6 trillion m310 trillion m3 of target exploration areas. In addition, China has granted 52 shale gas exploration
rights, with a total area of 164,000 km2. The exploration areas for shale gas are mainly clustered in the Sichuan Basin and its
peripheral areas.
Chinese government
The MLR has funded 2D exploration of 50 km and has deployed 1 exploration well (Ciye-1) in Changde District, Hunan Province.
The MLR has also evaluated the shale gas drilling explorations in Chengde Basin, Qaidam Basin and Songliao Basin. Regarding
Guizhou Province, Guizhou provincial government invested USD24.3 million (RMB150 million) in its four regions including
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northern Guizhou and the western Guizhou to conduct geological drilling and resource assessment. As a result, 26 geological data
wells were completed and the favorable zones were identified.
Chinese enterprises
CNPC In Q1 2014, CNPC fractured two platforms into shale gas fields in Changning Demonstration Zone (Sichuan Province). Of
this, the H3 platform was fractured into 2 wells and the H2 platform was fractured into 4 wells. The average daily outputs of each well
at H3 platform and H2 platform were over 100,000 m3 and over 200,000 m3 respectively. Zhaotong Demonstration Zone (Yunnan
Province) also completed 10 horizontal wells, reaching an average daily output of about 100,000 m3 each well and it is expected to
build up a certain scale of capacity. CNPC plans to invest USD1.63 billion (RMB10 billion) in these two demonstration zones in
2014 and to develop a capacity of 2.6 billion m3 of shale gas annually by 2015.
Yangchang Petroleum As of the end of 2013, Yanchang Petroleum has completed 39 shale gas wells, but its output of
shale gas remains low. Each straight well has an output of less than 3,000 m 3 a day and each horizontal well has an output of less
than 8,000 m3 a day.
Sinopec Sinopec has made significant discoveries in Xinchang Town, Weiyuan County, Sichuan Province, the southwest Sichuan
Basin, Pengshui County, Chongqing City, the northern part of Guizhou Province and in the Longma River under Jiaoshi Dam of
Fuling District, Chongqing City. Of this, the shale gas in Fuling District, Chongqing City has received the most attention because it
represents China's first success in the large-scale commercial exploitation of shale gas.
Sinopec Sichuan Vinylon Works (Sichuan Vinylon Works) is the beneficiary of the successful exploitation of the Fuling shale gas
field. CCM learned that at present, the desulfurization unit devices of this works need to consume 1.03 million m3 of Fuling shale
gas a day. Meanwhile, Sichuan Vinylon Works continues to produce chemical products based on shale gas as raw materials, which
indicates that Fuling shale gas has achieved large-scale industrialized application.
Sichuan Vinylon Works, as the only subsidiary of Sinopec that produces chemical and chemical-fiber products based on
natural gas, has always suffered the limitation of insufficient supply of natural gas since it was established and put into production.
The short supply of natural gas hinders the expansion of the company's capacity and scale. In 2013, Sichuan Vinylon Works
consumed 961 million m3 of natural gas. In terms of the full-load demand for natural gas being 1.55 billion m3, the gap between the
supply and demand has reached 589 million m3.
At present, the supply volume of Fuling shale gas has surpassed one third of the actual daily gas consumption of Sichuan Vinylon
Works. The management has stated that according to the plan, the supply volume of Fuling shale gas to Sichuan Vinylon Works
would reach 3 million m3 in mid-to-late May 2014. That is to say, the accumulative volume of shale gas will reach 1 billion
m3 annually. At that time, Fuling shale gas will exceed over 80% of the gas consumption of Sichuan Vinylon Works. It is initially
estimated that if the supply volume of Fuling shale gases maintains at 1 billion m3 to Sichuan Vinylon Works annually, Sichuan
Vinylon Works will add an output value of USD1.3 billion (RMB8 billion) for the whole year.
Shale gas may be able to be used in the production of olefins and the downstream derivatives in the future.
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Raw materials of olefins in China

Naphtha
Aug. 2014 Asia increases the supply of naphtha and Asian traders are anxious to market the naphtha. Specifically, Russian
exporters for naphtha haven't been affected by the sanction for the moment. Meanwhile, China's demand for naphtha has not
encountered a noticeable recovery, and thus the price trend of naphtha in China remains stable in this month.
As of 25 Aug., 2014, China's ex-works price of naphtha fluctuated between USD1,128/t and USD1,148/t, averaging USD1,135/t.
Thus, the price of naphtha in China maintains a stable trend.
In Aug. 2014, the supply of naphtha in Asia is sufficient. The demand from Europe is partly substituted by liquefied petroleum gas
(LPG), and Asian traders are eager to undersell naphtha cargoes since they lack confidence in the sustainable development of
naphtha.
Regarding Russia, although it suffers new sanction inflicted by the US, its supply of naphtha has not been affected yet. Statistics
show that Novatek, Russia's major naphtha exporter, exported 887,000 tonnes of naphtha in Q2 2014, increasing by 14.5% over
Q1 2014.
In terms of the demand in China, since the end of July 2014 when the National Development and Reform Commission downregulated the prices of gasoline and diesel, China's domestic demand for petro-based products has been strengthened. In late July
2014, the appreciation of RMB against USD enhanced the purchasing power for international naphtha. However, it is still not
enough to offset the negative influences caused by the international oversupply. Therefore, the wholesale price of China's naphtha
has been in consolidation after the fluctuations in 1012 Aug. 2014, waiting for rises.
However, according to CCM, when the peak period for petro-based products comes to an end in Sept. 2014 in Europe, there will
be more cargoes rushing into the Asian market. The US will also be confronted with the export pressure to Europe. It is predicted
that there will be about 2 million tonnes of naphtha cargoes from Europe, Mediterranean Region and the US landed in Asia. If there
are no significantly favorable conditions, the price of naphtha will not witness a big rise.
Figure 3: Ex-works price of naphtha in China, 28 July-25 Aug., 2014
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Source: CCM
Table 1: Apparent consumption of naphtha in China, as of June 2014, 000 tonnes

Naphtha
Output
Import volume
Export volume
Apparent Consumption
June 2014
2,252
153
2,405
June 2013
203
34.6
2.9
2,347
YoY change
10.94%
-55.78%
2.47%
Jan.June 2014
14,639
949
121
15,466
Jan.June 2013
14,399
1,781
324
15,856
1.7%
-46.7%
-62.6%
-2.5%
YoY change
Source: CCM
Import analysis of naphtha in China in June 2014

In June 2014, the import volume of naphtha in China totaled 153,586 tonnes, recording a MoM increase of 103.76% and a YoY
decline of 55.58%. Meanwhile, the average import price was USD993/t.
The sharp increase in import volume showed that the domestic trading turned to be active. Though the National Bureau of Statistics
released in June that the Purchasing Managers' Index (PMI) of manufacturing industry has just exceeded 50%, the enterprises hold
positive attitude towards the market in H2 2014. Thus, the import volume in July will continue to increase.
Regarding the import origins, South Korea, Algeria and Thailand were the top three naphtha suppliers to China in June. As for
importers by province, Liaoning, Guangdong and Jiangsu provinces were the front three.
Figure 4: Imports of naphtha in China, June 2013-June 2014
Source: CCM
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Coal
Aug. 2014 Shenhua Group announced that it would reduce the production of coal in 2014. Meanwhile, the price downturn of
Bohai-Rim steam coal slowed down. However, as there are still many problems existing in the coal industry, steam coal is not
expected to witness sustained development.
In Aug. 2014, although the coal price kept a downturn, it declined less than before. At the beginning of Aug. 2014, China Shenhua
Group Co., Ltd. (China Shenhua) announced that it would reduce the coal output by 50 million tonnes and cut down the sales volume
by 60 million tonnes. In mid-Aug. 2014, China National Coal Group Corp. (China Coal) also determined to reduce the coal output by
10% of the scheduled production, aiming to guarantee the price through output limitation.
However, the market seemingly failed to live up to expectation. For instance, the price of coal from Qinhuangdao City, Hebei
Province still kept on sliding. One of the main reasons was that the current sufficient coal capacity results in the continuous declines
of coal price. Although part of mines have been suspended or reduced production, the coal market still witnessed oversupply.
Besides, the main production bases such as Shanxi Province, Inner Mongolia Autonomous Region and Shaanxi Province still
constantly put the newly-established mines or mines after resource integration into production. Thus, the coal capacity was being
expanded. As long as it is profitable, most of the enterprises would maintain their production. That Shenhua Group, China Coal and
other leading enterprises reduced production may even not affect the regular production of these mines, in turn, maybe due to
output reduction of China Shenhua and China Coal, these mines are given space to increase output. In other words, as long as the
coal price makes a rebound, the coal output will recover in a short time. Therefore, that leading enterprises took the initiative to
reduce production is not always feasible to reduce the overall output of raw coal and further stabilize the price.
Nevertheless, taking the costs of coal mining into consideration and moreover counting on all kinds of taxes and transportation
costs, the current price of steam coal has declined to a low level and the space for continuous declines has been further narrowed.
In Sept. 2014, as the coal will seasonally encounter a recovery in demand and the Daqin Railway will be overhauled, the coal price
will be stabilized and even witness a small rise. However, under the influences of various negative factors such as overcapacity,
weak demand, high inventory and decreasing transportation costs, both the rising margin and the lasting time will be greatly limited.
According to the National Bureau of Statistics, China's output of raw coal continued to decrease in June 2014. The accumulative
output in Jan.June also decreased.
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Figure 5: FOB price of Bohai-rim steam coal (calorific value=5500 K), 2 July-20 Aug., 2014
Source: CCM
Table 2: Output of raw coal in China, as of June 2014, million tonnes

Item
June-14
Total output of raw coal
June-13
YoY change
Jan.-June 2014
Jan.-June 2013
YoY change
298
304
-1.97%
1,816
1,849.1
-1.79%
Output of raw coal (state-owned mines)
168.41
170.25
-1.08%
998.89
1,010.98
-1.20%
Output of raw coal (nonstate-owned mines)
129.59
133.75
-3.11%
817.11
838.12
-2.51%
Source: CCM
Methanol
Aug. 2014 The supply of China-made methanol was reduced, as the government enhanced the transportation management on
dangerous chemicals. Also, the import price of methanol saw increases due to the supply shortage from Southeast Asia.
In Aug. 2014, the wholesale price of home-made methanol in East China fluctuated from USD418/t to USD423/t.
In early Aug., due to the weak demand, producers and distributors did not deliver methanol in a large scale.
In mid-Aug., the logistics costs of methanol increased by USD6.49/tUSD12.97/t (RMB40/tRMB80/t) as the local governments of
provinces like Shandong and Hebei, enhanced the transportation management on dangerous chemicals which caused extension in
transportation cycle. Then the supply in East China decreased and the price began to rise.
In late Aug., northwestern China, the major production base concentratedly suspended the production facilities for maintenance.
Therefore, it is predicted that the supply of methanol will decline, and the price will stay at a relatively high level. However, it is worth
noting that the demand from traditional downstream industries hasn't recovered, causing the inactive transaction in China.
Therefore, part of the regions may encounter price decrease of methanol owing to the regional oversupply.
Southeast Asia continued to suspend or limit the production of methanol, leading to the supply shortage. Therefore, the import price
of methanol from Southeast Asia saw slight increases.
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Currently, the domestic methanol market is in off season. Nevertheless, in Sept. 2014 when the rainy season in southern China
comes to an end, the demand from house decoration industry will be strengthened. So, the price of home-made methanol is
expected to increase in the next month.
In June, the output and import volume of methanol in China increased obviously, with a growth rate of more than 30%. It seemed that
the demand for methanol was increasing, but the market participants stated that it would not continue for a long term and the peak
period would come after Sept. As some plants in northwest China restarted after maintenance, CCM estimated the output would
continue to rise in July.
Figure 6: Wholesale price and import cost price of methanol in East China, 28 July-25 August 2014
Note: Currently, the methanol-to-olefins projects are mainly distributed in East China, where most raw material comes from imported methanol with
homemade methanol as a supplement. Therefore, CCM chooses East China to analyse the wholesale price and import cost price.
Source: CCM
Table 3: Apparent consumption of methanol in China, as of June 2014, 000 tonnes

Methanol
Output
Import Volume
Export volume
Apparent consumption
June 2014
3,198
408
29
3,578
June 2013
2,327
276
175.9
2,426
YoY change
37.43%
47.83%
-83.51%
47.49%
Jan.-June 2014
17,413
1,667
492
18,588
Jan.-June 2013
14,047
2,816
270.6
16,592
YoY change
23.96%
-40.80%
81.82%
12.03%
Source: CCM
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Import analysis of methanol in China in June 2014

In June 2014, China imported 408,772 tonnes of methanol, with a MoM increase of 6.14% and a YoY increase of 48.46%. The
average import price reached USD351/t. The import price declined continuously, while the import volume steadily increased.
Besides, the transaction along ports was inactive. However, as the price in international market decreased, the importers in China
somehow raised the inventories and waited for the price recovery in domestic market.
Figure 7: Imports of methanol in China, June 2013-June 2014
Source: CCM
Regarding the importers by province in June 2014, Guangdong maintained at the first place, followed by Jiangsu and Zhejiang.
Guangdong's importers can still afford the inventory, so they increase the import volume continuously. As the production facilities in
northwest China were suspended for maintenance, its supply for East China declined. Therefore, the import volume of East China
witnessed obvious rises.
Figure 8: Imports of methanol by importer in China, Jan. 2014-June 2014
Source: CCM
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As for the import origins in June, Iran still ranked first with 125,945 tonnes. Saudi Arabia rose to the second place, with 125,753
tonnes, followed by Oman with 65,652 tonnes.
Figure 9: Imports of methanol by origin in China, Jan. 2014-June 2014
Source: CCM
China Olefins Market Review

Price analysis
Aug. 2014 The CFR prices of ethylene and propylene in China fell from highs. It is predicted to hold this level in Sept.
As of 25 Aug., 2014, the average cost and freight (CFR) price of propylene and ethylene in China recorded USD1,487/t. Of this, the
price of ethylene was USD1,553/t, while that of propylene was USD1,421/t.
The price declines of propylene and ethylene in this month can be ascribed to the weak demand from downstream markets.
Comparatively, the supply of ethylene in China increased. Due to the propylene explosion accident on 31 July, Gaoxiong
government ordered Taiwan-based LCY Chemical Group Co., Ltd. to halt its propylene business. Therefore, two sets of its
polypropylene production facilities were suspended for adjustment. So, Taiwan supplied more propylene externally.
Thus, the CFR price of propylene in China steadily decreased in Aug. Meanwhile, owing to the weak demand, the CFR price of
ethylene also declined. However, some producers and traders believed that the regional supply in Sept. will be tight. Furthermore,
as the small profits from ethylene downstream industries restrained its demand, the price of ethylene is expected to settle in Sept.
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Figure 10: CFR of olefins in China, 28 July-25 Aug., 2014
Note: As the domestic refineries sell small quantities of ethylene and propylene as monomers, CCM chooses their import prices as references. Tariff and
VAT not included in the CFR prices. Source: CCM
Source: CCM
Supply analysis
Aug. 2014 The olefins production facilities ran steadily as a whole.
On 29 July, 2014, a set of ethylene cracking device with a capacity of 450,000 t/a of Yangzi Petrochemical Company Ltd., China
Petrochemical Corporation (Sinopec Yangzi) was suspended, to support the 2014 Nanjing Youth Olympic Games. The suspension
will last for 45 days.
A set of methanol-to-olefins (MTO) device with a capacity of 295,000 t/a, Wison (Nanjing) Clean Energy Co., Ltd. was scheduled to
suspend for maintenance at the end of Aug.
The MTO plant with a capacity of 600,000 t/a of Shaanxi Yanchang & China Coal Yulin Energy Chemical Co., Ltd. ran smoothly, with
increasing external supply.
Operating situation of China's ethylene plants
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Table 4: Operating situation of China's ethylene plants, as of Aug. 2014

Company
Location
Capacity, '000 t/a
Status
Sinopec
/
10,440/
Sinopec Yanshan
Beijing
710
Beijing Eastern Petrochemical Beijing
150
Sinopec Shanghai
Shanghai
700
Qilu Petrochemical Engineering Zibo, Shandong
800
Sinopec Yangzi
Nanjing, Jiangsu
700No.1 facility to be suspended from 29 July to 10 Sept.
Sinopec Maoming
Maoming, Guangdong
360
Sinopec Maoming
Maoming, Guangdong
640
Sinopec Zhongyuan
Puyang, Henan
180
Sinopec Zhongyuan
Puyang, Henan
260
Sinopec Guangzhou
Guangzhou, Guangdong
210
Sinopec-BASF Yangzi
Nanjing, Jiangsu
740
Sinopec-SECCO Shanghai
Shanghai
1,190Scheduled turnaround from 10 March to 2 April
Sinopec Fujian
Fuzhou, Fujian
800
Sinopec Tianjin
Tianjin
1,200
Sinopec Zhenhai
Zhenhai, Zhejiang
1,000Scheduled turnaround from 18 May to 3 July
Sinopec Wuhan
Wuhan, Hubei
800
CNPC
/
5,170/
CNPC Lanzhou
Lanzhou, Gansu
700Scheduled turnaround from 26 June to mid- Aug.
CNPC Liaoyang
Liaoyang, Liaoning
200
CNPC Daqing
Daqing, Heilongjiang
600
CNPC Daqing
Daqing, Heilongjiang
600
CNPC Fushun
Fushun, Liaoning
200
CNPC Fushun
Fushun, Liaoning
800
CNPC Dushanzi
Karamay, Xinjiang
1,220Scheduled turnaround from 2 May to 12 May
CNPC Jilin
Jilin, Jilin
700
CNPC Jilin
Jilin, Jilin
150
CNOOC
/
950/
CNOOC Huizhou
Huizhou, Guangdong
950
China Shenhua
/
260/
Shenhua Baotou
Baotou, Inner Mongolia
260
Local Refinery
/
1,065/
Liaoning Huajin Chemical
Panjin, Liaoning
630Scheduled turnaround from 9 July, and to be restarted after 50 days
Shenyang Chemical Group
Shenyang, Liaoning
630
Wison Nanjing
Nanjing, Jiangsu
135
Total
17,885/
Start-up year
/
1976
1996
1989
1987
1987
1996
1996
2011
2011
1997
2011
2005
2009
2010
2010
2013
/
1975
1980
1986
2012
1991
2012
2009
1996
1982
/
2011
/
2011
/
2010
2010
2013
/
Note: Sinopec stands for China Petrochemical Corporation; CNPC stands for China National Petroleum Corporation; CNOOC stands for China National
Offshore Oil Corporation; China Shenhua stands for China Shenhua Group Co., Ltd.
Source: CCM
China Olefins News Express

CDT to withdraw from coal chemical industry
The news that CDT transferred all its coal chemical businesses aroused a hit throughout the coal chemical industry in China. Many
experts thought that it is the false choice on the production base of raw materials and the problems of talents and technology that
brought losses to the enterprises in coal chemical business. Meanwhile, the main business, thermal power generation witnessed
improvement. Therefore, this business transfer is actually CDT's strategic adjustment.
In early July 2014, China Datang Corporation (CDT) announced that it signed an agreement framework with China Reform Holdings
Corporation Ltd. (China Reform). Although the final confirmation has not been settled, it is true that CDT transferred all its equities in
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the coal chemical business. The release of this news really gave a big shock to the overall market. After that, on 22 July, 2014, the
National Energy Administration (NEA) released the Notice to Regularize the Development of CTL and SNG Industry (CTL stands
for coal-to-liquids, and SNG stands for synthetic natural gas), in which the SNG project with annual output of less than 2 billion m3
and the CTL project with annual output of less than 1 million tonnes will no longer get approval and the development of SNG projects
will be prohibited in those provinces completely depending on the input of coal resources. Thus, the trend with tightened policies
has generally unfolded. The coal chemical industry is the field with high added value in the coal industrial chain. However, on its way
to become an energy industry, coal chemical industry is always blamed by the educational circles for its destructive impact on the
environment and greatly affected by the tightened policies conducted by the Chinese government. Nowadays, GD Power
Development Co., Ltd. (China Guodian), CDT and China National Offshore Oil Corp. (CNOOC) all shook off their related
businesses. In China Olefins Market E-News 1407, CCM has ever reported that CNOOC undersold its coal chemical equities as
its coal chemical business was inconsistent with its development strategy. Then what ground does CDT take into consideration in
terms of this equity transfer? Is the fact that the central enterprises gathered to withdraw from the coal chemical field predicted that
China's coal chemical industry is going to face a turning point? And how many impacts will be laid on the coal-to-olefins (CTO)
projects?
Comment: Although the coal chemical industry is often questioned, how about the prospect of CTO which belongs to the coal
chemical sector as well? In order to figure it out, CCM consulted Mr. Zhao, an olefins expert in Beijing. Mr. Zhao disclosed that in
terms of the conservation of energy, there must be some energy lost when a kind of energy turns into another one. So does the
olefins based on coal. As a chemical product meeting people's daily needs, it is converted from a kind of energy. Moreover, there is
still a huge supply gap of these products and the gap will last for ten years. Therefore, it is not necessary to worry about the future of
CTO, but the common problems lurking in the olefins projects such as high water consumption and large waste gas emission
should be attached more attention. What the enterprises need to do is to upgrade their processes and technologies instead of
withdrawing from the coal chemical industry. Wang Lijie, director of the Energy Research Institute, China University of Mining and
Technology disclosed in the 2014 China (Beijing) International Energy Forum (2014 Energy Forum) that China has to make use of
coal in a clean and efficient way so as to achieve high-efficient power generation and new-type coal chemical production. Actually,
the future of efficient and clean utilization of coal resources is promising, calling for great efforts.
Here let us review the event that CDT, a power enterprise, transferred its coal chemical business. On 7 July, 2014, Datang
International Power Generation Co.,Ltd. (Datang Power) signed the Agreement Framework on Reorganizing Coal Chemical
Industry and Related Projects with China Reform in order to reorganize its coal chemical part and related projects. The agreement
released by two enterprises presented that CDT almost sold all its coal chemical projects of Datang Energy Chemical Company
Limited (Datang Energy), of which China's first demonstration project is included. Zhang Ming, general manager of Datang Energy,
reflected that since 2005, CDT has entered the coal chemical industry and carried out polypropylene, SNG and coal-to-fertilizers
projects in succession. However, in nearly a decade, these projects did not contribute to company's development or make any
progress, but became a heavy burden laid on the company.
Is CDT to withdraw from coal chemical business an epitome of the industry or just a special case? In view of the reasons why CDT
transferred all its coal chemical equities, CCM took further efforts to consult different experts. Xing Lei, head of the Listed Coal
Enterprise Research Center of Coal Economics Academic Research Program, Central University of Finance and Economics,
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revealed that CDT's transfer of equities is a special case. As a power enterprise without coal mines previously, CDT failed to
receive the expected profits even after investing over USD8.12 billion (RMB50 billion) in the projects. Moreover, the poor-quality
lignit, raw material for CTO, is hard to be processed in the course of coal chemical production. CDT is confronted with technical and
talent problems. Qian Yu, professor of the School of Chemistry and Chemical Engineering, South China University of Technology,
said that the state energy giants who make adjustments aim to regulate their own strategies, and rationalize their over-enthusiasm
to the coal chemical industry in previous years. Chen Zhongfa, head of the Policy & Law Department of China Huadian Corporation,
also disclosed in the 2014 Energy Forum that in addition to the changes embodied in the coal chemical industry and the
environmental pressure from the public, the increasing benefits from thermoelectricity power generation is also mainly responsible
for power enterprises to abandon coal chemical business. Furthermore, according to data collected by CCM, China has launched
67 SNG projects and 26 CTL projects. By 2020, China's overall coal chemical projects including those put into production,
obtaining operation permits and under design will consume 750 million tonnes of coal. In total, the capacity of the CTL and SNG
projects will reach 40 million t/a and 280 billion m3/a respectively. What's more, due to the oil-gas pipelines opened between China
and Burma, the contract signed by China and Russia on natural gas, and the vigorous construction of liquefied natural gas (LNG)
terminals in China's coastal areas, the enterprises engaged in SNG will face intensified competitions in the international and
domestic markets. Therefore, it is easy to understand why part of the central enterprises are eager to withdraw from the SNG and
CTL businesses.
Exploration of Chinas coal enterprise transformation based on current development situation

of coal chemical industry in Anhui Province
Aug. 2014 CCM continues to follow the current development situation of the coal chemical industry in Anhui Province, one of the
largest coal provinces in China, and hopes to explore some development ideas from China's domestic coal enterprises for
transforming the coal chemical industry.
Anhui Province is accelerating the development of its coal chemical industry. At the end of July 2014, the Investment Conference for
Huainan Coal Chemical Base was held, with 29 enterprises present. Among the attendees, 2 enterprises made their positions
clear that they would invest in the base. 11 enterprises engage in olefins deep-processing and 8 enterprises that are investing in
utilities, logistics and facilities also presented their investment intentions. Moreover, a large dock is under construction at the dam at
Huaihe River, Panji District, Huainan City. This dock is being built for the coal-to-methanol-to-olefins project, which has a capacity of
1.7 million t/a at the Huainan coal chemical base. Related officials at the Huainan coal chemical base revealed that the base will be
the core of the modern coal chemical industry in Anhui Province, and will be one of the largest coal chemical bases nationwide.
Currently, most coal enterprises in Anhui Province are developing their own coal chemical projects. For instance, the second-phase
coking project conducted by Huaibei Mining Group will be completed and inspected at the end of 2015, and will then be put into
production. The State Development & Investment Corp. has made the construction of synthetic natural gas (SNG) and coal-toliquids (CTL) bases as a crucial part of its strategy for transformation and development. Wanbei Coal-Electricity Group Co., Ltd.
expects to achieve the combination of new coal chemicals with traditional coal chemicals at the end of the 12th Five-year Plan, and
its revenue from the coal chemical businesses is expected to exceed USD1.62 billion (RMB10 billion).
By the way, in the article Anhui Province to establish new coal chemical base in China Olefins Market E-News 1406, CCM ever
reported that in April 2014, Anhui Province approved the Overall Development Plan for Anhui Huainan New Coal Chemical Base
(the Plan). From the Plan, CCM learned that by 2030, Huainan base will have completed an overall investment of USD40.53 billion
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(RMB250 billion). It will produce 16.3 million tonnes of chemical products annually, achieve an annual revenue of USD40.53 billion
(RMB12.42 billion), and become a new world-class coal chemical base. This indicates that that the local government's strong
support will drive the coal chemical industry in Anhui Province towards transformation and upgrading.
However, in view of China's overall situation, since the coal chemical market is struggling, whether the coal chemical industry should
proceed with developments is a problem facing Chinese coal enterprises. Many central enterprises have planned to withdraw from
the coal chemical industry. In July 2014, the central enterprise China Datang Corporation announced that it had signed an
agreement framework with China Reform Holdings Corporation Ltd. and would reorganize its coal chemical sector and related
projects to withdraw from the coal chemical industry.
As the state energy giants begin to cease their coal chemical businesses, China's development of the coal chemical industry will be
restricted in the short term. This is mainly because the coal chemical businesses, for instance, the technical bottlenecks in the SNG
and CTL projects, are hard to break and these projects call for a great deal of investment. In particular, in lieu of the limited
environmental capacity and other practical limitations, these projects have a high market risk in the future.
This trend also warns relatively weaker enterprises that they ought to rationalize their investments in the coal chemical industry.
Therefore, in the long term, the state energy giants' withdrawal will not only purify the market environment of the coal chemical
industry, but will also help the enterprises equipped with technological and resource superiority to develop their own advantages or
niches within the coal chemical industry, which will in turn benefit the development of the overall coal chemical industry.
Transforming and upgrading will be the main development direction of the coal chemical industry, especially because of the
fundamental problems that are inhibiting the industry. Take Anhui Province as an example. In 2013, the overall coal industry in Anhui
Province experienced losses of USD582.03 million (RMB3.59 billion) with profits reducing by USD1.76 billion (RMB10.88 billion)
year on year. In 2014, China's coal price is still at a low level. As of 6 Aug., 2014, the price of stream coal (5,000 K) in Qinhuangdao
City, Hebei Province, an important reference standard in the coal chemical industry, was only USD68.09 (RMB420), decreasing by
USD24.32 (RMB150) from the beginning of 2014. This price is lower than the production cost in Anhui Province's coal industry.
Thus, due to the sluggish market, many coal enterprises in Anhui Province must develop their modern coal chemical businesses to
adjust their product structure and to alleviate market risks.
For coal enterprises in Anhui Province, the efficient and clean use of coal is the main development direction, as well as being the
reference point for research and development. This is in contrast to coal enterprises in the northwest regions, which are aimlessly
allocating their investments.
According to a survey conducted by CCM, since it is the petrochemical industry which dominates the pricing power on chemical
products, most coal chemical products are less competitive than petrochemical products. Thus, coal enterprises in Anhui Province
take the extension of the coal chemical chain and resource optimization as starting points, and are now advancing their integrated
coal chemical projects.
In response to these circumstances, the managers at Huainan base said that they have to make full use of the comprehensive
advantages of their coal resources, water resources, market, location and transportation. They insist that utilizing their coal
resources in a clean and efficient way, developing new modern coal chemical industry into a mainstream industry where coal-toolefins (CTO), SNG, CTL, high-performance synthetic rubbers and chemical fertilizers are targetedly developed, and the integration
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of the coal chemical industry are necessary.

CCM discussed with related experts inside the coal chemical industry about the prospects of integration of the coal chemical
industry in Anhui Province. Experts stated that even when the coal chemical industry is integrated, coal enterprise still have to make
continued efforts to couple and integrate a series of coal chemical technologies in order to enhance the comprehensive utilization
rate of resources. Then, in some areas with the right conditions, the coal chemical industry should consider cooperating with other
energy industries such as metallurgy, cement, electric power, coking, weather and wind power for joint production in order to
maximize efficiency. Meanwhile, the coal chemical industry is reliant on the pillar industries in Anhui's economy, such as
automobiles, equipment manufacturing, high-quality metal materials, cement and high-quality non-metallic materials, electronic
information and agricultural products processing. However, the coal chemical industry in Anhui Province has only just started to
modernize, and is afflicted with a short industrial chain and a small product variety which consists of mainly CTO, CTL, SNG and
coal-to-ethylene glycol. Much work still needs to be done to extend and advance the coal chemical industrial chain and to achieve
industrial integration.
The coal chemical industry in Anhui Province faces many challenges. Enterprises will have difficulties in developing their coal
chemical businesses, if they decide to continue producing coal chemicals. CCM will keenly follow the Anhui Province coal chemical
industry and will make updates on the latest news and developments.
No.6 furnace of Sinopec Qilus olefins plant reconstructed successfully

Aug. 2014 The cracking furnace of the olefins plant of Sinopec Qilu was reconstructed, mainly to get light raw materials of
ethylene. In this article, CCM will report the detailed reconstruction of Sinopec Qilu's olefins plant and based on that discuss the
development of China's petroleum-based olefins devices in the future - to separate raw material, ethane from imported natural gas.
On 4 Aug., 2014, the waste heat boiler of the No.6 cracking furnace in the cracking workshop of the olefins plant of Sinopec Qilu
Company (Sinopec Qilu) was successfully hoisted. The lightness transformation of raw materials sustained for more than a month
was coming to the last installation stage.
Previously, Sinopec Qilu produced ethylene from naphtha with the cost of USD1,300/t. However, olefins enterprises in the Middle
East and the US take ethane as raw material while the olefins projects of China Shenhua Group Co., Ltd. apply coal. But their costs
are all lower than that of Sinopec Qilu. Moreover, compared with other ethylene plants of China Petrochemical Corporation
(Sinopec), the cost of Sinopec Qilus is higher. For instance, the output ratio of ethylene from naphtha of several advanced
enterprises like Zhenhai Refining & Chemical Company, China Petrochemical Corporation (Sinopec Zhenhai) is no more than
50%. But that of Sinopec Qilus ethylene new device is closed to 70%. It is a premise to reduce costs and increase efficiency by
improving the structure of raw materials.
Accordingly, the construction of No.6 furnace is designed respectively by three companies. Engineering technicians assure its
process and quality through careful collation and coordinative work.
Comment: It is an effective way for petrochemical industry to optimize the structure of raw materials and lower the dependence on
naphtha, so as to enhance its competitiveness in the new period. CCM found that Sinopec Qilu is not the first enterprise to
reconstruct the cracking furnace and adjust raw material structure. Besides, many enterprises including Sinopec Zhenhai and
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CCM Newsletter
Wuhan Branch, China Petrochemical Corporation (Sinopec Wuhan) have already tried that way earlier and gained good
effects.
Currently, the naphtha dependence rate of the ethylene plant of Sinopec Zhenhai decreases from above 60% to 51%; the
proportions of high ethane gas, liquefied gas and hydrocracking tail oil are increasing; the newly-established light hydrocarbon
recovery device recycles high ethane gas from refinery's dry gas effectively. Consequently, by the above measures Sinopec
Zhenhai's ethylene plant saves about USD162.12 million (RMB1 billion) from the purchase of raw materials each year. Moreover,
Sinopec Wuhan has also adjusted its raw material structure a lot. It produces more low-cost raw materials such as C2, C5 and
saturated liquefied gas during oil refining, for ethylene production. The proportion of naphtha (the most expensive raw material) of
Sinopec Wuhan's ethylene plant is declining, from 64% before to 57% in June and to 55% in July. Thus, its production cost is
decreasing obviously.
Notably, there is an interesting phenomenon: the reconstruction of Sinopec Qilu's No.6 furnace is connected with the liquefied
natural gas (LNG) project's construction of Qingdao Branch, China Petrochemical Corporation (Sinopec Qingdao). Specifically, the
Sinopec Qingdao's LNG project will be put into production in Oct. 2014. It will separate the imported natural gas, expected to gain
130,000 tonnes of by-product, ethane (precisely an ideal raw material to produce ethylene). Therefore, olefins plants would take this
by-product and crack them deeply. And Sinopec Qilu's ethylene cost is expected to lower with such a high-quality and inexpensive
raw material.
According to CCM, Sinopec Qilu is certain about this opportunity brought by Sinopec Qingdao's LNG terminal. Thus, it
reconstructed its No.6 cracking furnace of the olefins plant for raw material lightness and also listed it as one of its ten biggest
engineering projects in 2014.
Additionally, there are LNG terminals under construction in coastal areas like Tianjin LNG terminal of China National Offshore Oil
Corporation (CNOOC), Shenzhen LNG terminal, CNOOC and East Guangdong LNG terminal, CNOOC as well as the secondphase LNG terminal of China National Petroleum Corp. (CNPC) in Rudong County, Jiangsu Province. Moreover, those terminals
are supposed to provide ethane, their by-product for local olefins plants. Perhaps the olefins plants and LNG terminals should
further discuss how to achieve mutal benefits. Specifically, the government regards natural gas as an important substitute to
decrease the emissions of carbon dioxide. Along with large imports of natural gas, it is likely to bring unexpected opportunity to
olefins plants.
Moreover, on 3 July, 2014, the olefins plant of Sinopec Qilu stopped the No. 6 furnace in the cracking workshop, and started the 40day reconstruction. In mid-Aug., the No.6 furnace was installed completely. It is predicted that 260,000 tonnes of light hydrocarbon
will be produced so as to dramatically decrease the processing cost of ethylene. Cheng Guanghui, chief of the Production and
Technology Sector said that the company will reconstruct the No.5 furnace and continue to adjust the raw material structure in the
future.
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Overcapacity beckons as China adds PDH capacity

Second half of Aug. 2014 CCM learned that Zhejiang Satellite is commissioning a PDH project. It is predicted that there will be
five PDH production facilities put into operation in China during H2 2014. In this article, CCM analyzes the prospects of these PDH
projects by assessing the profit, supply and demand situations.
In Aug. 2014, the propane dehydrogenation (PDH) project conducted by Zhejiang Satellite Petro-Chemical Co., Ltd. (Zhejiang
Satellite) is in commissioning, and the overall industrial chain will be opened up. Also, the PDH production lines of Zhejiang
Shaoxing Sanyuan Petrochemical Co., Ltd. (Zhejiang Sanyuan), Ningbo Haiyue New Material Co., Ltd. (Ningbo Haiyue), Wanhua
Chemical Group Co., Ltd. (Wanhua Chemical) and Oriental Energy Co., Ltd. (Oriental Energy) will soon be put into production.
It is predicted that by the end of 2014, with these five PDH production facilities expected to enter into operation, China will add a
capacity of 2.85 million t/a for propylene. The trend for centralizing the operational PDH projects has not only aroused attention, but
has also caused international concern about the future of PDH projects. In order to resolve this question, CCM analyzed the profit,
supply and demand situations of the PDH projects.
Profit analysis
PDH production facilities generally require propane with a purity of over 95%. Due to the high sulfur content of propane from China's
refinery plants, and the decentralized propane supply, the propane adopted in China's PDH projects needs to be imported from
other countries. According to Zhang Chunbao, chief engineer of the operating PDH project conducted by Tianjin Bohai Chemical
Industry Group Co., Ltd. (Bohai Chemical), Bohai Chemical's PDH production facilities requires 720,000 tonnes of propane
annually, all of which is imported. Therefore, whether China can continue to acquire cheap propane will determine the profitability of
the PDH projects.
CCM analyzed the PDH profit situation by comparing the price difference between imported propylene and imported propane.
As a general rule, the operating rates of PDH projects are around 90% (It usually takes 45 days to suspend production so as to
conduct overhauls and replace catalysts). Propane accounts for around 75% of the propylene production costs in PDH projects.
Combining with what Zhang Baochun stated, the production costs and operation costs of PDH projects are about USD324/t
(RMB2,000/t). Since the proportion of propane to propylene in the PDH project is 1.2:1, CCM used the following equation to
analyze the profit situation:
Propylene price-1.2propane price=price difference
According to statistics summarized by CCM, as of June 2014, the price difference between China's imported propylene and
propane was USD451/t and the average price difference in Jan.June 2014 was USD491/t. Since 2013, the price differences
between China's imported propylene and propane have all surpassed USD300/t. Therefore, judging from the current situation, the
PDH projects have presented greater profit margins in China's market in 2014. Thus, it is clear as to why PDH projects are currently
popular in China. However, there needs to be an analysis of China's propylene supply situation to determine whether PDH has a
bright future in China.
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Figure 11: Price of imported propylene & propane (after-tax) in China, Nov. 2012-June 2014
Source: CCM
Supply analysis
China's first PDH production facility was established by Bohai Chemical, with a capacity of 600,000 t/a for propylene, and will be
put into operation in Sept. 2014. It is the largest PDH production facility in the world. Bohai Chemical's second-phase PDH
production facility, which also has a capacity of 600,000 t/a, will be completed in 2017.
Apart from Bohai Chemical, according to the incomplete statistics summarized by CCM, by the end of 2015, there will be nine sets
of PDH production facilities put into operation, with a total capacity of 5.92 million t/a. Also, there are another four sets of PDH
production facilities whose time of commissioning is not definite, as well as the second-phase plans in projects that have already
been started, with a total planned capacity of 4.43 million t/a.
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Table 5: Basic information of PDH projects in China by 2015

Enterprise
Plant location
Planned capacity, 000 Needed raw material, 000

t/a
t/a
Time of
commissioning
Tianjin Bohai Chemical Industry Group Co., Ltd.
Tianjin City
600
720
Sept. 2013
Zhejiang Satellite Petro-Chemical Co., Ltd.
Pinghu City, Zhejiang Province
450
540
June 2014
Ningbo Haiyue New Material Co., Ltd.
Ningbo City, Zhejiang Province
600
720
July 2014
Zhejiang Shaoxing Sanyuan Petrochemical Co., Ltd.
Shaoxing City, Zhejiang Province
450
540
July 2014
Yantai Wanhua Group Co., Ltd.
Yantai City, Shandong Province
750
900
Dec. 2014
Zhangjiagang Yangzi Petrochemical Co., Ltd.
Zhangjiagang City, Jinagsu

Province
600
720
Dec. 2014
Fujian Meide Petrochemical Co., Ltd.
Fuqing City, Fujian Province
660
792
At the end of 2015
Jiangsu Haili Chemical Co., Ltd.
Dafeng City, Jiangsu Province
500
600
At the end of 2015
Oriental Energy Co., Ltd.(Ningbo Fuji Petrochemical Co.,Ningbo City, Zhejiang Province
Ltd.)
660
792
2015
Changjiang Natural Gas Chemical Co., Ltd.
650
780
2015
5,920
7,100
Nantong City, Jiangsu Province
Total
Source: CCM
Demand analysis
Regarding the current situation, there is still a big gap existing in China's demand for propylene. In 2013, China's equivalent
consumption gap of propylene reached 6.2 million tonnes, with an import dependence of 35%.
Regarding the consumption category, China's propylene is mainly used to produce polypropylene, acrylonitrile, butanol /octanol,
epoxy propane, acrylic acid and phenol/acetone. Among these products, polypropylene is the largest in terms of the production
scale. In 2013, China produced 12.45 million tonnes of polypropylene, consuming 60% propylene. Polypropylene products are
mainly classified into polypropylene granular products and polypropylene powder products. Polypropylene granular products, based
on the polymer-grade propylene raw materials, are usually manufactured by petrochemical enterprises and they are also selfsupplied products or mutual-supplied products in petrochemical enterprises. Polypropylene powder products are mainly
manufactured by local enterprises, and their propylene raw materials are purchased from local refinery plants. This propylene is
mainly sourced from Shandong Province, and is of relatively poor quality.
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Figure 12: Output and equivalent consumption of propylene in China, 2000-2020E
Source: CCM
Figure 13: Equivalent consumption of propylene in China, 2013
Source: CCM
However, according to statistics, since 2009, the growth rate of China's olefins capacity has surpassed the growth rate of the
demand for olefins. From the point of the devices expected to put into operation, the coal-to-olefins projects with a low-cost
advantage and the existing naphtha-to-olefins projects are about to shadow over the future of the PDH projects.
As is mentioned above, China's current propylene equivalent consumption gap is about 6.2 million tonnes. And by 2015, there will
be nine sets of PDH production facilities with an overall capacity of 6 million t/a put into operation. There are also other projects that
are being planned. The output growth of propylene will be faster than the demand growth, so it is predicted that the propylene
overcapacity will occur in China by 2017. According to statistics summarized by CCM, China's actual output of propylene in 2013
was 16.60 million tonnes. With an average annual growth rate of 10.6%, the actual output of propylene will amount to 22.20 million
tonnes by 2017. China's actual consumption of propylene was 19.24 million tonnes in 2013. In view of the average annual demand
growth rate of 5.4%, the demand does not match with the output growth rate.
In the future, when China suffers the problem of propylene overcapacity, it will need to seek new markets to export its propylene.
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However, this may be problematic because China's potential propylene export destinations are also adding propylene capacity.
At present there are more than 20 sets of PDH production facilities in operation in the world, which are mainly clustered in the
Middle East and East Asia. Moreover, the PDH production facilities under construction in East Asia and North America are
predicted to start production in 2015-2020. Given this, China may only export its propylene to Southeast Asia in the future. Also,
CCM learned that the average ex-work price of propylene in May 2014 was USD1,670/t (RMB10,300/t). The CFR price (from the
Middle East to Southeast Asia) of propylene in Southeast Asia was just USD1,355/t. This means that the CFR price (from North
China to Southeast Asia) of China's propylene is totally uncompetitive with that from Middle East to Southeast Asia.
Therefore, it is worthwhile for investors to reconsider their views on the prospects of China's PDH projects.
Sinopec exports PP technology to US

15 Aug. 2014 Sinopec reverses to export PP technology to the US, symbolizing that its technology progresses to a new level.
On 15 Aug., 2014, China Petrochemical Corporation (Sinopec) released that it signed a contract concerning the technical approval
of gas-phase polypropylene (PP) continuous pre-polymerization technology with the Formosa Plastics Corporation, America
(FPCA). After that, this technology became Sinopec's first PP technology exported to the US.
It is disclosed that the gas-phase PP continuous pre-polymerization technology is a kind of efficient, eco-friendly and low-cost
technology developed by Beijing Chemical Industry Research Institute (BCIRI) through years of research and development. It can
effectively activate the catalysts, control the temperature fluctuation in the bed layer of reactor, and reduce agglomeration and fine
powder. Meanwhile, this technology also can substantially reduce the consumption of hexane, lower the content of volatile organic
compounds (VOCs) in the PP products and reduce the operation costs of devices. As of H1 2014, the technology has been
approved to apply in four sets of devices in China.
Moreover, BCIRI even made enormous breakthroughs in the development of polyolefin catalysts, olefin polymerization process and
new polyolefin products. At present, the BCE catalysts and DQ-HA catalysts developed by BCIRI have been put in large-scale
production and been exported to overseas markets. The gas-phase PP continuous pre-polymerization technology and the hightemperature gas-phase PP technology have also been put in industrial production. What's more, the G resin, high melt strength
PP and high-purity PP and other new products with high added value have achieved industrialization.
Comment: The development of China's petrochemical industry is always subject to the overseas core technologies and the
booming propane dehydrogenation (PDH) investments in recent years also mainly depend on importing Oleflex process from the
US-based Universal Oil Products Company (UOP) and Catofin process from the US-based Lummus Corporation with high prices.
CCM thought that the exports of the gas-phase PP continuous pre-polymerization technology has a great significance to Sinopec's
technology. Actually technology exports have greater potential than product exports. If Chinese enterprises are able to gain more
initiative in technology, maybe they can get rid of the current depression existing in China's chemical market and even get out of the
dilemma where the profits grow slowly.
In the intensified market competitions, the one who first masters the advanced science and technology holds the initiative. If an
enterprise is able to export its technology, its products are bound to gain superiority in the market competition. At the beginning of
the Reform and Opening-up, developed countries like the US and Germany started to export their technologies to China, let alone
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the Reform and Opening-up, developed countries like the US and Germany started to export their technologies to China, let alone
the exports of products from these countries. However, when China introduces technologies from these developed countries, those
Chinese products manufactured by the similar technology, are obviously uncompetitive in the market competition. Now, the reason
why Sinopec is able to export its PP technology to the US is mainly because its technology has reached the advanced level
worldwide and moreover its products have been exported to overseas in a large scale before this technology export.
By the way, this is not the first time for Sinopec to export its technologies to overseas. Recently, CCM learned from the
headquarters of Sinopec that Sinopec Engineering (Group) Co., Ltd. (SEG) successfully won the bidding in the oil refinery project of
Malaysia Petroliam Nasional Berhad. This project includes the device for atmospheric distillation with a capacity of 15 million t/a,
the device for atmospheric distillation with a capacity of 8.8 million t/a and other devices for core processes. The contract overall
covers the design, purchase, construction and commissioning, totally valued at about USD1.33 billion. It is disclosed that this
project, located in Johor, Malaysia, is the project constructed by Malaysia in recent two decades with the largest investment. SEG
won out from the competition against many internationally renowned engineering companies, taking a solid step towards the
internationalization.
New ethylene refined catalyst upgrades CTO process

3 Aug., 2014 The new LY-C2-MTO (an ethylene refined catalyst) developed by Petrochemical Research Institute, PetroChina
Company Limited was announced to have been applied in the first big coal-to-olefins (CTO) device in the world.
The CTO device with a capacity of 600,000 t/a belongs to China Shenhua (Baotou) Charcoal Chemical Industry Co., Ltd. (Shenhua
Baotou). With this catalyst, the device has continually run for nearly a year. Consequently, all indicators meet the device's
requirements. Currently, the hydrogen volume in the inlet section of the reactor is 40 L/L; the acetylene volume in the inlet section is
2 L/L5 L/L; the temperature in the inlet section maintains at 32; acetylene is not tested in the exit of the reactor. It is proved to
reach the leading level among the same catalyst types.
The CTO project of Shenhua Baotou is the first device applying DMTO technology developed by Dalian Institute of Chemical
Physics, Chinese Academy of Sciences (DICP). Its catalysts are mainly provided by Chia Tai Energy Materials (Dalian) Co., Ltd.,
which is the only company authorized by DICP to produce DMTO catalyst. Its capacity now is 3,000 t/a. By the way, a typical
600,000 t/a CTO project would consume 600 tonnes of catalyst each year.
In addition, another representative MTO process in China is methanol-to-olefins technology (SMTO) of China Petroleum and
Chemical Corporation (Sinopec). The catalyst is developed by Sinopec Shanghai Research Institute of Petrochemical Technology
and provided by Sinopec Catalyst Co., Ltd.
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CCM Newsletter
CDT spins off coal chemical business valued at USD16.21 billion

Mid-July 2014 Datang International Power Generation Co., Ltd. (Datang Power), a listed company owned by China Datang
Corporation (CDT) announced that it signed an agreement framework with China Reform Holdings Corporation Ltd., to restructure
its coal chemical business and related projects.
It is disclosed that the chemical coal business of Datang Power involoves an asset of up to USD16.21 billion (RMB100 billion). It is
the second time for a state-owned enterprise to withdraw from coal chemical business, following China National Offshore Oil
Corporation (CNOOC).
Coal chemical projects are really of huge investment but little return, found by CCM through the Datang Power's 2013 financial
report. In detail, its revenue from the chemical business totaled less than USD810,622 (RMB5 million) with a gross profit margin of
only 3.55%. However, the investment was huge. In 2013 only, the company invested USD1.42 million (RMB8.75 million) into the
chemical business. Moreover, the accumulative investment amounted to USD9.47 million (RMB58.39 million) as of 2013, ranking
first among thermal power, hydropower, wind power and photovoltaic businesses. Furthermore, the follow-up investment will reach
USD1.62 billion (RMB10 billion).
Hazard Analysis and Security Technology Research on MTO Device inspected and accepted by
Sinopec
11 Aug., 2014 The Hazard Analysis and Security Technology Research on MTO Device (MTO stands for methanol-to-olefins)
was inspected and accepted by China Petrochemical Corporation (Sinopec).
Accordingly, the comprehensive and systematical hazard analysis and security technology research have been done on the MTO
device of Sinopec Zhongyuan Petrochemical Corp., Ltd. (Sinopec Zhongyuan) with a capacity of 600,000 t/a. The research
presents considerable significance to assure the safe operation of the MTO device: it would remove or sharply reduce the negative
influences generated from accidents or unscheduled stops of the devices, bringing substantial economic and social effects. Also, it
is very instructive to ensure the safety of larger devices established in the future.
Moreover, entrusted by Sinopec, the research was carried out together by Sinopec Engineering Incorporation (SEI) and Zhongyuan
Petrochemical. Some achievements have already been transferred and applied successfully in the MTO production equipment of
Zhongyuan Petrochemical. Besides, the MTO project of Zhongyuan Petrochemical put into production after 14-month construction,
is Sinopec's first coal chemical demonstration project. It is the pioneer for Sinopec in coal chemical field. Currently, it runs well with
methanol (raw material) mainly from Henan Province.
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CCM Newsletter
Sinopec Maomings new chemical products hit gloomy market

July 2014 Sinopec Maoming Company (Sinopec Maoming) hit a record within these two years in its sales of new chemical
products, as it strengthened the communication and coordination with South China Branch of Sinopec Chemical Commercial
Holding Company Limited (Sinopec South China).
In detail, they intensified the promotion of new products, paid return visits to customers and provided technical services to
customers. Consequently, they sold 18,600 tonnes of new chemical products in July 2014, completing 200% of the monthly quota
stipulated by the headquarters. The sales increased by 11,700 tonnes year on year, and 10,000 tonnes month on month, recording
a substantial profit.
Since April 2014, the plastic market has entered into the traditional slack season. The domestic plastic market continued to be
sluggish influenced by the decreased price of crude oil in China. Enterprises all straddled this situation. However, involved in such a
dilemma, Sinopec Maoming paved the way and cooperated with Sinopec South China to visit downstream customers and
strengthen the promotion of new products. Besides, it probed into the latest market dynamics and grasped customers' needs. After
that, it rationally scheduled the production and optimized products' quality, to produce and sell more high-profit new products.
Meanwhile, it followed the requirements of "one product, one strategy and one consultant" and deepened the integration of
production, sales with research. Then it actively transferred from "product seller" to "service provider" and formed the brand image
of Sinopec Maoming, so as to lay a solid foundation for the new products' further expansion.
Currently, the sales of new products are progressing steadily according to the plan for early Aug. As the downstream customers
begin to show their confidence on the market, Sinopec Maoming will further deepen the integration of production, sales with
research and strive for another sale record in Aug.
By the way, in 2013, the ethylene plant of Sinopec Maoming recorded a total output of about 1.13 million tonnes of ethylene and
produced over 3 million tonnes of downstream chemical products like synthetic resin, claiming over half of the plastic raw material
market in Guangdong's manufacturing industry. Many famous brands such as Midea, HONDA, TOYOTA and NISSAN are big
customers purchasing new products from Sinopec Maoming, applying substantial special materials of the ethylene plant of Sinopec
Maoming.
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CCM Newsletter
Zhongtian Hechuang comprehensively accelerates construction of coal deep-processing

demonstration projects
18 Aug., 2014 Zhongtian Hechuang Energy Co., Ltd. (Zhongtian Hechuang) comprehensively accelerated the construction of its
coal deep-processing demonstration projects (including the largest coal-to-olefins project with a capacity of 1.37 million t/a among
the approved projects at present in China) in Ordos, Inner Mongolia. Currently, the major projects are all propelled as scheduled. In
response to the features within the projects, such as grand-scale devices, complicated processing, difficult management and high
requirements on staff, Zhongtian Hechuang comprehensively arranged and designed plans to ensure the engineering progress.
Until now, the first-phase project has got the approval, the coal mine construction has been advanced safely and stably, the overall
chemical design has received reply, the basic engineering design has been basically completed, the ultra long-cycle, long-cycle
and less long-cycle equipment orders have been fulfilled and all supporting facilities such as factories have been accomplished. As
the construction is in full swing, the project construction are pushed ahead orderly and rapidly in accordance with the Overall Plan
for Arrangement and Control . The major projects in 2014 are propelled on schedule towards the final objectives to complete
interim construction in Oct. 2015 and produce qualified products in July 2016.
By the way, Zhongtian Hechuang, an oversized modern coal deep-processing enterprise integrating the production of coal, coal
chemical products and electric power, is a joint venture established by China Coal Energy Company Limited (China Coal), China
Petrochemical Corporation (Sinopec), Shenergy Group Company Limited (Shenergy Group) and Inner Mongolia Man Shi Coal
Group Co., Ltd.(Man Shi Coal). Of this, China Coal holds 38.75% equity, Sinopec 38.75%, Shenergy Group 12.5% and Man Shi
Coal 10%.
CNPC Daqing develops and produces PE-RT to meet market demand

19 Aug., 2014 The plastic plant of Daqing Branch, China National Petroleum Corp. (CNPC Daqing) developed a new type of
polyethylene of raised temperature resistance (PE-RT), marked as PE DQDN-3711.
CNPC Daqing achieved the first industrialized trial production in a full-density polyethylene device with a capacity of 250,000 t/a,
and produced 1,800 tonnes of PE-RT. The new product, developed to meet part of the clients' special demand for PE products
after the market research, lays a foundation for CNPC Daqing to upgrade product performance, adjust structure and expand
market.
Accordingly, this product, a kind of medium-density PE-RT special resin, is mainly used to produce PE-RT pipes along with homemade metallocene catalyst. It is expected to have a considerable profit margin in the market.
Flash News
Yulin Shenhua finishes periphery grounding system for polypropylene device
30 July, 2014 The peripheral grounding system for the polypropylene device of Yulin Shenhua Energy Co., Ltd. was finished after
two-month construction.
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CCM Newsletter
Lanzhou PetroChina again encounters fire caused by propylene leakage

4 Aug., 2014 A regional branch of PetroChina Company Limited, Lanzhou PetroChina encountered a fire caused by propylene
leakage, which has happened many times and forced the enterprise to relocate; however, a high cost of USD9.73 billion (RMB60
billion) will put off the relocation by three years.
Shenyang Blower Works makes breakthrough in new pulverized coal gasification technology
4 Aug., 2014 Shenyang Blower Works Group Corporation was announced to make breakthroughs in the R&D of new pulverized
coal gasification technology, which can be applied in the coal-to-methanol process.
China Shenhua to take over Datang Keshiketeng's SNG business

8 Aug., 2014 It's disclosed that China Shenhua Group Co., Ltd. intended to take over the synthetic natural gas business of Inner
Mongolia Datang International Keshiketeng SNG Co., Ltd., a subsidiary of Datang Energy Chemical Co., Ltd., which is now being
assessed. More importantly, China Shenhua valued at Datang Keshiketeng's pipeline from Keshiketeng Town to Beijing.
Sinopec Wuhan produces coating material J47-15

23 Aug., 2014 Wuhan Branch, China Petrochemical Corporation successfully produced qualified coating material, J47-15.
Sichuan's laboratory for shale gas inaugurated in Chengdu City

22 Aug., 2014 Sichuan Laboratory for the Evaluation and Exploitation of Shale Gas in China, jointly established by
PetroChina Southwest Oil & Gas Field Company and Sichuan Coalfield Geology Bureau, was inaugurated in Chengdu City,
Sichuan Province.
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Journalist: Duanxian Ye
Editor: Jenny Xing
Chief Editor: Alan Lu
Publisher: Guangzhou CCM Information Science &
Technology Co.,Ltd
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VOL.1 Issue 8, August,29, 2014

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