Aerial photo taken on Aug. 3, 2018 shows the view of Ningdong Energy and Chemical Industry Base in northwest China's Ningxia Hui Autonomous Region. (Xinhua/Wang Peng)

   

Small and medium-sized chemical enterprises in eastern China tend to relocate their plants to central and western China, where petrochemical enterprises have resource advantages, Bai Yi, an expert with the China National Petroleum & Chemical Planning Institute, said during a webinar on Thursday.

In eastern parts of China along the coast, such as Shandong, Jiangsu, Liaoning and Zhejiang, giant petrochemical companies are leading China's industrial development with high-end products and imported resources, she said.

The relocations come as chemical enterprises are seeing a growth in costs and meager profit margins, said Bai. 

Overall costs in the petrochemical industry increased 3.1 percent year-on-year in 2019, 1.8 percentage points higher than the growth rate of the industry's total revenues, said Bai.

129 Chinese companies were included on the Fortune Global 500 list last year, with that figure surpassing the US' for the first time. The US had 121 companies on the list. 

However, the profit gap between China and the US in the industry was still evident. The average profits of Chinese petrochemical companies on the list was $1.92 billion, lower than the $5.23 billion average of US petrochemical companies, said Bai. 

Global petrochemical enterprises tend to relocate their plants to the Asia-Pacific region, which has market potential, or to Middle East countries that have resource advantages, said Bai.

Addressing the impacts of COVID-19 on the chemical industry, she said the price of petrochemical products would likely further decrease as the pandemic contains midstream and downstream demand and oil prices drop, thereby squeezing profit margins. However, weak oil prices have little impact on rigid demand for chemical fertilizer, agricultural pesticides, paint and certain other commodities.

She noted that during China's 14th Five Year Plan, the domestic chemical industry will further enhance international cooperation to utilize international resources and markets, boost its competiveness and expand exports of advanced chemical products.