To reduce its dependence on its major supplier, China has announced plans to significantly upgrade its manufacturing capacity for the petrochemical used to make textile fibers and bottles. A bulk of the chemical paraxylene used by China is currently being imported from Japan and Korea.
According to reports citing sources close to the matter, China is apparently planning to add around 10 million tons of paraxylene manufacturing capacity by March 2020.
That amount is enough to manufacture roughly 22 trillion pieces of 500ml plastic bottles. If China does go ahead with its plan, it could force Japanese and South Korean suppliers to cut their production.
China is currently the largest consumer of the petrochemical, importing roughly 60 percent of its requirements to feed its ever-growing demand. Roughly half of its imported paraxylene comes from both South Korea and Japan.
China's decision to manufacturing its own supply will undoubtedly hurt its biggest suppliers, including Japan's JXTG Holdings and South Korea's Lotte Chemical, and Hyundai Cosmo Petrochemical. According to industry experts, major Asian exporters of paraxylene will likely see drastic cutbacks in their outputs as China initiates its plans.
The country's manufacturing capacity expansion plans are being led by private Chinese firms working together with state-run oil refineries. The integration is expected to drastically reduce the cost of acquiring the petrochemical as well as allow China to regulate its own supply.
According to industry experts, China could reduce its overall paraxylene imports by as much as 7 million tons in 2019. The country is expected to further reduce that number to 4 million tons by 2021. This year, China only imported around 12.6 million tons, a drastic drop from the 16 million tons of paraxylene it imported in 2018.
Chinese firm Hengli Group had set up a paraxylene manufacturing plant in March, capable of producing 4.5 million tons per year. The plant is located in the city of Dalian in China's Liaoning Province.
Meanwhile, Zhejiang Petrochemical has announced plans to build a plant in the city of Zhoushan in the province of Zhejiang before the year ends. The facility will reportedly be capable of producing 4 million tons per year.
Other projects that will be part of China's plans to boost its own production of the petrochemical include a plant to be established by Sinopec.
The plant, which will be located in Hainan, is capable of producing 1 million tons of paraxylene per year. Shangdong-based Hongrun Petrochemical is also reportedly now conducting trials runs for its facility capable of producing 700,000 tons of paraxylene per year.
