Insufficient innovation hinders the petrochemical industry

In 2013, despite widespread pessimism about the global economic outlook, Zhu Hao, Deputy Director of the Information Department at the China Petroleum and Chemical Industry Federation, remained optimistic. He predicted that the overall performance of China’s petrochemical industry would remain stable, with some downward pressure in the first half of the year but a more steady recovery in the second half. This sentiment reflected an industry navigating both challenges and progress. The trend of stabilization and gradual recovery became evident in 2012, as the sector overcame early-year headwinds. By July, the growth rate of total output value had dropped to 4.2%, but it rebounded sharply by November, reaching 16.1% year-on-year. From January to November 2012, the industry's total output reached 11.11 trillion yuan, up 11.8% from the previous year. The full-year estimate was 12.25 trillion yuan, representing a 12.2% increase. Quarterly data showed strong performance, especially in the fourth quarter, where growth hit 15%. Major product outputs continued to rise. Despite reduced crude oil production in Bohai Bay, oil and gas production maintained steady growth. Crude oil output reached 190 million tons, up 1.8%, while natural gas output rose to 96.49 billion cubic meters, an increase of 6.9%. Crude oil processing volume also grew by 3.2%, and pesticide and fertilizer production saw significant increases of 19.7% and 13.4%, respectively. These gains supported national energy and food security. Industrial structure optimization was another key development. The natural gas extraction industry outperformed oil exploration, growing at 7.3% and contributing 9.8% of the total output of the oil and gas sector. Synthetic materials and organic chemical raw materials accounted for 18.2% and 16.3% of the chemical industry’s output, respectively. Tire radialization rates exceeded 87.4%, and ion-exchange membrane caustic soda made up 82.5% of total production. Regional development became more balanced. The eastern, central, and western regions saw output growth of 11.2%, 11.4%, and 14.5%, respectively. Notably, western provinces like Ningxia and Yunnan experienced rapid growth. Investment in the central and western regions remained strong, accounting for 51.5% of total investment in the first 11 months of 2012. Fixed asset investment in the industry surged, reaching 155 billion yuan in the first 11 months of 2012, a 26% increase from the previous year. The full-year estimate was around 1.8 trillion yuan, reflecting sustained high growth. Technology-intensive industries saw even stronger investment, with synthetic materials and organic chemical raw materials increasing by 57.5% and 58.8%, respectively. Private investment also accelerated, rising 48.1% and making up 26.2% of total investment. Despite these positive trends, price pressures persisted. Basic inorganic chemicals and synthetic materials saw sharp declines, with prices for PVC, PP, and HDPE dropping significantly. While prices stabilized in the fourth quarter, certain sectors still faced challenges. Trade activity remained robust, with total imports and exports reaching 580.47 billion USD in the first 11 months of 2012. However, the trade deficit widened, driven by increased oil and gas imports. Fertilizer exports declined, while rubber products continued to grow in value. Overcapacity and declining profits posed major challenges. Many sectors, including ammonia, urea, and phosphate fertilizers, faced low prices due to excess supply. Profitability dropped across multiple sub-sectors, with the refining industry suffering losses for 15 consecutive months. Weak innovation capacity was identified as a core issue. Insufficient R&D investment, lack of technological breakthroughs, and underdeveloped innovation systems hindered competitiveness. Environmental and safety concerns also added pressure, highlighted by the Xiamen PX project controversy, which underscored the need for better community engagement and responsible industrial practices. Looking ahead, 2013 offered opportunities for further consolidation. A recovering global economy, strong investment growth, and stable domestic demand were expected to drive progress. With strategic reforms and continued focus on innovation, the petrochemical industry aimed to strengthen its position in the long term.