rongsheng petrochemical bloomberg quotation

Zhejiang Rongsheng Holding Group Co., Ltd. operates as an investment company. The Company offers industrial investment, financial investment, investment consulting, and other services. Zhejiang Rongsheng Holding Group also operates in real estate development, business management consulting, and other businesses.

BEIJING, Aug 14 (Reuters) - Rongsheng Petrochemical , the listed arm of a major shareholder in one of China’s biggest private oil refineries, expects demand for energy and chemical products to return to normal in the country in the second half of this year.

The Zhejiang-based Chinese private refiner saw profit more than triple in the first half of 2020, bolstered by the launch of its 400,000 barrel-per-day Zhejiang Petrochemical Co (ZPC), according to a stock exchange filing earlier this week.

Rongsheng expects to start trial operations of the second phase of the refining project, adding another 400,000 bpd of refining capacity and 1.4 million tonnes of ethylene production capacity in the fourth quarter of 2020.

“We expect the effects of the coronavirus pandemic on energy and chemicals to have basically faded in spite of the possibility of new waves of outbreak,” said Quan Weiying, board secretary of Rongsheng, in response to Reuters questions in an online briefing.

But Li Shuirong, president of Rongsheng, told the briefing that it was still in the process of applying for an export quota and would adjust production based on market demand. (Reporting by Muyu Xu and Chen Aizhu; Editing by Jacqueline Wong)

Shenzhen-listed Rongsheng Petrochemical Co Ltd in August started trial operations at a 2-million tonne per year paraxylene facility in the eastern city of Ningbo, according to two sources with direct knowledge of Rongsheng’s oil trade.

A Rongsheng official declined to confirm the start-up, but pointed to a company release on Sept. 1 which referred to “the facility’s test operations being on schedule”.

Some industry experts have defended the safety of the production of paraxylene, often referred to as PX, as public opposition to new petrochemical plants threatens to disrupt expansion plans by state giants such as Sinopec Corp.

Rongsheng’s quiet launch of the Ningbo plant comes after Dragon Aromatics, another independently-run petrochemical producer, was forced to shutter its large PX facility in Fujian province after a fire in April.

Rongsheng Petrochemical is controlled by Zhejiang Rongsheng Holding Group, a private firm that started as a small polyester maker before expanding into petrochemicals and real estate, with assets worth over 50 billion yuan ($7.86 billion), according to the group’s website.

Sidi Kerir Petrochemicals Co. S.A.E specializes in petrochemical products manufacturing and marketing. The group proposes essentially ethylene, high density polyethylene and linear low density polyethylene mainly used in plastic bags, agricultural plastic wraps, containers, pallets, boxes, dustbins and toys production.

(Bloomberg) -- Some of China’s biggest refiners have flagged an improving economic outlook for the world’s biggest crude importer, a bullish signal for an oil market that’s faltering on global slowdown concerns.

The economic slump in China has passed and government stimulus has helped to boost confidence for consumers, according to Xin Sun, director at Shenghong Petrochemical International. Oil processing rates are improving and strong gasoline consumption will lead the recovery in transport fuel demand, said Chen Hongbing, deputy general manager at Rongsheng Petrochemical.

The premiums for cargoes of some of Asia’s favorite grades such as ESPO of Russia and Al-Shaheen of Qatar have jumped in recent days to their highest in months, traders told Bloomberg on Wednesday.

In the UK, for example, fuel sales surged earlier this month to their highest level since the first lockdown in March last year, according to government data cited by Bloomberg.

According to Bloomberg, Rongsheng Petrochemical Co of China bought as much as 12 million barrels of oil from Middle Eastern producers Iraq, Oman, and Abu Dhabi. This was the biggest purchase in seven months.

Japan’s refiners, for their part, have bought at least five oil cargoes of the Al-Shaheen grade from Qatar at the biggest premium this year, according to data compiled by Bloomberg.

Privately owned unaffiliated refineries, known as “teapots,”[3] mainly clustered in Shandong province, have been at the center of Beijing’s longtime struggle to rein in surplus refining capacity and, more recently, to cut carbon emissions. A year ago, Beijing launched its latest attempt to shutter outdated and inefficient teapots — an effort that coincides with the emergence of a new generation of independent players that are building and operating fully integrated mega-petrochemical complexes.[4]

The politics surrounding this new class of greenfield mega-refineries is important, as is their geographical distribution. Beijing’s reform strategy is focused on reducing the country’s petrochemical imports and growing its high value-added chemical business while capping crude processing capacity. The push by Beijing in this direction has been conducive to the development of privately-led mega refining and petrochemical projects, which local officials have welcomed and staunchly supported.[20]

Yet, of the three most recent major additions to China’s greenfield refinery landscape, none are in Shandong province, home to a little over half the country’s independent refining capacity. Hengli’s Changxing integrated petrochemical complex is situated in Liaoning, Zhejiang’s (ZPC) Zhoushan facility in Zhejiang, and Shenghong’s Lianyungang plant in Jiangsu.[21]

But with the start-up of advanced liquids-to-chemicals complexes in neighboring provinces, Shandong’s competitiveness has diminished.[23] And with pressure mounting to find new drivers for the provincial economy, Shandong officials have put in play a plan aimed at shuttering smaller capacity plants and thus clearing the way for a large-scale private sector-led refining and petrochemical complex on Yulong Island, whose construction is well underway.[24] They have also been developing compensation and worker relocation packages to cushion the impact of planned plant closures, while obtaining letters of guarantee from independent refiners pledging that they will neither resell their crude import quotas nor try to purchase such allocations.[25]

To be sure, the number of Shandong’s independent refiners is shrinking and their composition within the province and across the country is changing — with some smaller-scale units facing closure and others (e.g., Shandong Haike Group, Shandong Shouguang Luqing Petrochemical Corp, and Shandong Chambroad Group) pursuing efforts to diversify their sources of revenue by moving up the value chain. But make no mistake: China’s teapots still account for a third of China’s total refining capacity and a fifth of the country’s crude oil imports. They continue to employ creative defensive measures in the face of government and market pressures, have partnered with state-owned companies, and are deeply integrated with crucial industries downstream.[26] They are consummate survivors in a key sector that continues to evolve — and they remain too important to be driven out of the domestic market or allowed to fail.

In 2016, during the period of frenzied post-licensing crude oil importing by Chinese independents, Saudi Arabia began targeting teapots on the spot market, as did Kuwait. Iran also joined the fray, with the National Iranian Oil Company (NIOC) operating through an independent trader Trafigura to sell cargoes to Chinese independents.[27] Since then, the coming online of major new greenfield refineries such as Rongsheng ZPC and Hengli Changxing, and Shenghong, which are designed to operate using medium-sour crude, have led Middle East producers to pursue long-term supply contracts with private Chinese refiners. In 2021, the combined share of crude shipments from Saudi Arabia, UAE, Oman, and Kuwait to China’s independent refiners accounted for 32.5%, an increase of more than 8% over the previous year.[28] This is a trend that Beijing seems intent on supporting, as some bigger, more sophisticated private refiners whose business strategy aligns with President Xi’s vision have started to receive tax benefits or permissions to import larger volumes of crude directly from major producers such as Saudi Arabia.[29]

The shift in Saudi Aramco’s market strategy to focus on customer diversification has paid off in the form of valuable supply relationships with Chinese independents. And Aramco’s efforts to expand its presence in the Chinese refining market and lock in demand have dovetailed neatly with the development of China’s new greenfield refineries.[30] Over the past several years, Aramco has collaborated with both state-owned and independent refiners to develop integrated liquids-to-chemicals complexes in China. In 2018, following on the heels of an oil supply agreement, Aramco purchased a 9% stake in ZPC’s Zhoushan integrated refinery. In March of this year, Saudi Aramco and its joint venture partners, NORINCO Group and Panjin Sincen, made a final investment decision (FID) to develop a major liquids-to-chemicals facility in northeast China.[31] Also in March, Aramco and state-owned Sinopec agreed to conduct a feasibility study aimed at assessing capacity expansion of the Fujian Refining and Petrochemical Co. Ltd.’s integrated refining and chemical production complex.[32]

Commenting on the rationale for these undertakings, Mohammed Al Qahtani, Aramco’s Senior Vice-President of Downstream, stated: “China is a cornerstone of our downstream expansion strategy in Asia and an increasingly significant driver of global chemical demand.”[33] But what Al Qahtani did notsay is that the ties forged between Aramco and Chinese leading teapots (e.g., Shandong Chambroad Petrochemicals) and new liquids-to-chemicals complexes have been instrumental in Saudi Arabia regaining its position as China’s top crude oil supplier in the battle for market share with Russia.[34] Just a few short years ago, independents’ crude purchases had helped Russia gain market share at the expense of Saudi Arabia, accelerating the two exporters’ diverging fortunes in China. In fact, between 2010 and 2015, independent refiners’ imports of Eastern Siberia Pacific Ocean (ESPO) blend accounted for 92% of the growth in Russian crude deliveries to China.[35] But since then, China’s new generation of independents have played a significant role in Saudi Arabia clawing back market share and, with Beijing’s assent, have fortified their supply relationship with the Kingdom.

Vertical integration along the value chain has become a global trend in the petrochemical industry, specifically in refining and chemical operations. China’s drive to self-sufficiency in chemicals is a key factor powering this worldwide trend.[42] And it is the emergent “second generation” of independent refiners that it is helping make China the frontrunner in developing massive liquids-to-chemicals complexes. Following Beijing’s lead, Shandong officials appear determined to follow this trend rather than risk being left in its wake.

As Chinese private refiners’ number, size, and level of sophistication has changed, so too have their roles not just in the domestic petroleum market but in their relations with Middle East suppliers. Beijing’s import licensing and quota policies have enabled some teapot refiners to maintain profitability and others to thrive by sourcing crude oil from the Middle East. For their part, Gulf producers have found Chinese teapots to be valuable customers in the spot market in the battle for market share and, especially in the case of Aramco, in the effort to capture the growth of the Chinese domestic petrochemicals market as it expands.

Bloomberg quoted another industry executive as saying that the economic decline that gripped China earlier this year amid the lockdowns is now over and refining rates are on the rise. Gasoline consumption has also picked up and will lead the rebound in fuel demand, Chen Hongbing, deputy general manager at Rongsheng Petrochemical said at the industry event.

With demand for transport fuels set to tail off in the years ahead, a new breed of processing plants is sprouting up across the region. These integrated refineries convert oil into petrochemicals, the building blocks for everything from food packaging to car interiors, and produce less fuels like gasoline.

In China, the biggest of these is Rongsheng Petrochemical Co.’s plant on Zhoushan island, near Ningbo. The 800,000 barrel-a-day operation opened in 2019 and will reach full capacity before year-end. An Indian Oil Corp.-led group is planning a gigantic 1.2 million barrels a day oil-to-chemicals complex on the country’s west coast. Saudi Aramco, as part of its strategy to invest downstream in Asia, has or plans to take a stake in both projects.

All told, more than half of the refining capacity that comes on stream from 2019 to 2027 will be added in Asia and around 70% to 80% of this will be plastics-focused, according to industry consultant Wood Mackenzie Ltd. Petrochemicals will account for more than a third of global oil demand growth to 2030 and nearly half through 2050, the International Energy Agency predicts.

“It doesn’t make sense now to operate a standalone refinery or a standalone petrochemicals plant for that matter," said Sushant Gupta, research director for Asia Pacific refining at WoodMac. Smaller facilities will find the new environment challenging, while there’s also a risk of over-capacity, he said.

Consumer and government pressure to reduce the use of plastics that are choking the world’s oceans is a hard-to-quantify threat to demand for petrochemicals. Asia consumes about half the world’s plastic packaging, according to BloombergNEF, and imports even more waste for recycling from the U.S. and Europe.

IEA forecasts for petrochemicals demand are based on strong historical growth where plastics consumption has outstripped economic expansion, according to Christof H. Ruehl, a senior research scholar at Columbia University’s Center on Global Energy Policy. But even moderate assumptions on more recycling and lower consumption of single-use packaging could bring forward the agency’s peak oil demand forecast by about a decade, he said.

Adding another wrinkle to the industry’s transition to petrochemicals is the pandemic, which has left refiners worldwide struggling with weak margins and could stem the flow of downstream investment from the Middle East to Asia. Complex refining margins in Singapore are at 52 cents a barrel, compared with a five-year average of $4.18.

In addition to what Indian Oil is planning, Reliance Industries Ltd. has invested about $20 billion in recent years to double its petrochemicals production capacity and make refining more efficient. Chairman Mukesh Ambani told shareholders last month that the company had proprietary technology to convert gasoline and diesel into the building blocks to produce plastics.

Indian Oil is investing heavily in raising the petrochemicals intensity of its refineries, said Shrikant Madhav Vaidya, chairman of the state-owned refiner. “We are still way below the global average and there is a big scope of improvement and further addition of petrochemical capacities."