SRI Says China Will Become a Major Petrochemical Competition State

October 13 20:08:13, 2023

SRI Consulting, based in Houston, USA, released a report a few days ago that China will become a major player in the world's petrochemical industry. The report compares the cost of the construction and operation of petrochemical installations in China and the United States, Japan, and Germany, and believes that China's main competitive advantage is low-cost labor. Strong regional demand, lower equipment construction costs, and financial expenses have become the main driver of China's rapid expansion. SRI's senior consultants stated that China can now use local construction forces, equipment, machinery and materials to build chemical plants. China’s resource costs, especially its labor costs, are much lower than those of developed countries. The cost of building chemical plants in China is one-third lower than that of the United States in the Gulf of Mexico. However, the costs of building installations in different locations in China are not the same.

The report believes that China’s recently built modern petrochemical complexes are highly competitive, even if they are exported to China by Saudi Arabia with significant raw material cost advantages. Based on the CFROI (Return on Investment Rate of Funds) in 2004, the CFROI value of naphtha-based petrochemical complexes recently built by Chinese manufacturers is close to that of US producers that use ethane as raw materials, but higher than Germany and Japan are producers of naphtha as raw materials.

China has planned to build several more integrated petrochemical complexes at the world scale, which are expected to be put into operation in the next few years. SRI consultants believe that once the equipment is built and put into operation, manufacturers that have much lower investment costs than their competitors will have lower production costs and are more competitive.

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