Published on February 21, 2014
Other Chinese markets struggling with excess capacity are:
Crude oil market- In 2013, crude oil import growth was lower than 4 per cent. Crude oil has become the major source of new energies used to replace gasoline and diesel. China is also trying to promote energy conservation and emission-reduction projects. These projects will lessen the demand for energy. Coal prices in China have dropped to extremely low levels due to the sluggish economy. However, crude prices remain high and emergence of more firms will help increase use of coal.
America has reduced its crude oil imports due to the shale gas revolution. Oil producing countries are hesitant to decrease output bearing in mind the huge profits. The imbalance in demand and supply is bound to bring down international crude values in 2014.
As far as the petrochemical feedstock market is concerned, the government is likely to shut down several under-developed chemical factories in order to reduce environmental issues. If these factories are shut down then excess capacity may be eased for certain products, thereby supporting the market rates of those products. Thus, major chemical feedstock will not be produced by small scale companies.
Acetone market- In 2013, acetone capacity improved and the demand also surpassed market supply. However, excess capacity of about 930kt for the acetone market will lower acetone prices in 2014.
Methyl Ethyl Ketone (MEK) market- The MEK market in China is struggling with excess supply. As supply exceeded demand, China MEK prices started declining from January 2014. Analysts expect MEK prices in 2014 to be higher than that in 2013. However, it is likely that MEK rates in 2014 will fluctuate.
