| China's Energy Saving and Emission Abatement Industry 2008 Outlook |
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In 2008, energy saving and emission abatement will be the basis for company developments in China. Under the premise of cost advantage, scale advantage and technical innovation, a company’s competitiveness development, such as product upgrades and business structural upgrades, has to be inline with government’s policy directions, such as environmental friendly operations.
New materials (eg, polyurethane) industry
The polyurethane market continued to maintain strong momentum throughout 2007, with strong demand for raw materials such as MDI, TDI and BDO. Excluding the demand from building insulation market, it is forecast that China’s MDI demand will maintain at 15% annually for the next 3 years; if the building insulation market is also considered, the demand growth will be even higher. In May 2007, China’s Ministry of Construction announced the Rigid Polyurethane Foam Exterior Insulation Engineering Technology Guide, which signalled the official promotion for polyurethane’s construction and energy saving applications in China. This also implied that the demand for polyurethane energy saving materials in China will experience rapid growth in the next few years. As the application guidelines and project design specifications for construction and energy savings will be gradually announced, polyurethane, as an excellent insulation and energy saving material, will have vast potential in the construction and energy saving markets. Judging from Ministry of Construction’s promotional stance, polyurethane is expected to a major building insulation material in the future, hence a significant demand for MDI in China. On the other hand, as energy saving and emission abatement will become an important policy focus in 2008, the demand for MDI in this market should be unleashed under the mandate for energy saving construction materials. This is also an additional benefit for innovative materials companies, as the recent tax reform and R&D tax incentives will contribute extra profits to them. |
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Coal chemical industry
Due to the shortcomings of China's energy structure, that is, coal rich and oil deficient, and factors such as high oil price and rapid economic growth, vigorously developing the coal chemical industry has been viewed as an important means to ease China’s energy crisis. In recent years, China has achieved significant research progress in areas such as coal gasification, coal liquefaction, coal chemical co-production and C1 chemical technology, and gradually building up a portfolio of new coal chemical technologies and techniques with independent intellectual property rights. Thus China’s coal chemical industry has entered a growth stage.
At present, China's coal chemical industry mainly focuses on coal-to-methanol, followed by methanol to DME and olefins, so methanol as an alternative energy has become a trend in China. China’s methanol is currently used in formaldehyde, acetic acid, MTBE, methylamine and methyl chlorine. Taking into account the increasing demand for methanol from alcohol ether fuels and DME sectors, it is expected China’s demand for methanol will reach 19 million tons in 2010. However, it is also expected that the domestic production supply will reach 20.3 – 25.7 million tons, hence a possible supply surplus of methanol. Therefore the market is watching the upcoming regulatory standards for methanol petrol and DME vehicle fuels, which have the potential to be the new consumption spot for methanol.
Impact from new regulations from the government
The government has indicated that it will focus on the quality of economy in 2008, thus development quality, rather than growth speed alone, is becoming more important as an economic objective. The government may rationalize existing resources and energy pricing mechanism, in order to guide the industrial structural adjustments and upgrades in China. The expectation for introducing market-based refined oil pricing, resources tax improvement and even fuel tax will still be high in 2008, as these policies may help China’s resources allocation efficiency and development upgrades of downstream industries. Once energies such as petrol, gas and refined oil are priced under the market mechanism, monopoly companies such as PetroChina and Sinopec will enjoy further uplifts in profits and international competitiveness, but at the short term expense of some downstream companies. |
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