Sinopec Gears Up for Competition from US Petrochem Firms

To be able to withstand the challenge from low priced petrochemicals from the US in future, Asia's biggest retailer, Sinopec Corp, earlier called China Petroleum and Chemical Corp, is gearing up to reduce its petrochemical production costs and enhance its product mix, a top official of the company said.

Sinopec's petrochemical business is suffering due to heavy reliance on naphtha as a key feedstock.
 
Meanwhile, a surge in US's production of shale gas, which too can be used as a feedstock for production of petrochemical, is drawing several investors to the US petrochemical industry, Sinopec vice chairman and president Wang Tianpu informed media while announcing the firm's results.
 
The US petrochemical producers are largely shifting away from using naphtha as the main feedstock, and are making large investments in plants operating on ethane, made from shale gas. US shale gas incorporates several components, which help petrochemical producers to substantially cut their costs, something that was not visualised by Sinopec earlier.
 
Sinopec's petrochemical business is already struggling to sustain competition extended by low-cost imports from the Middle East and the company is now striving to reduce its use of naphtha to cut costs, Mr. Tianpu said.
 
Also, the company is trying to develop more and more products with improved value propositions and to aggressively boost its coal-to-chemical business, so as to make its petrochemical business more competitive, he added.
 
Stirred by a fall in its earnings from upstream and chemical businesses, the net profits of the firm for 2012 plummeted 12.8 percent.
 
The company's operating profit for 2012 totalled to just 367 million yuan or US$ 59.1 million, against 2011's 25.3 billion yuan. Besides other factors, the fall is also attributable to economic slump in China, which caused the product prices to fall sharply.
 
China is the biggest importer of petrochemicals in Asia.