By Chen Aizhu

SINGAPORE (Reuters) – Chinese language oil refiners and petrochemical corporations are investing tens of billions of {dollars} to provide high-end chemical substances for photo voltaic panels and lithium-ion batteries to revenue from rising demand for vitality transition applied sciences.

The investments illustrate China’s drive to cut back its import dependence and additional cement its dominance of renewable vitality and electrical automobile provide chains. The transfer pits the Chinese language corporations in opposition to Dow Chemical, Exxon Mobil (NYSE:) and BASF in making key supplies.

Corporations together with Wanhua Chemical, Zhejiang Petrochemical Corp (ZPC) and Hengli Petrochemical and state oil big Sinopec (OTC:) Corp are main the shift, business executives and analysts stated.

They’re shifting from making extra primary petrochemicals for polyester materials and plastic packaging to manufacturing increased worth merchandise reminiscent of polyolefin elastomers (POE) used to guard the cells on photo voltaic panels, ultra-high-molecular-weight polyethylene for lithium-ion battery separators and carbon fibre for wind turbine blades.

“Overcapacity and weak demand for commodity chemical substances, and China’s quickly rising industries like photo voltaic, electrical automobiles are the important thing drivers for corporations to increase into high-end, excessive performing supplies,” stated Kelly Cui, Shanghai-based principal analyst with consultancy Wooden Mackenzie.

China’s glutted market in polyethylene and polyesters after years of fast petrochemical capability enlargement is prompting a number of the shift.

The drive additionally aligns with Beijing’s push for corporations to interrupt by way of technological bottlenecks for producing key new supplies and strengthen home provide chains, and builds off China’s standing because the world’s largest producer of electrical automobiles, EV batteries and photo voltaic panels.

“Corporations are shifting in the direction of serving the brand new vitality sectors the place China is already main in manufacturing,” stated Zhao Tongyang, deputy chief engineer on the China Nationwide Petroleum and Chemical Planning Institute (NPCPI).

ZPC, Hengli, and smaller refiner Shandong Chambroad Petrochemical are every constructing multi-billion-dollar complexes to make the brand new supplies, with manufacturing as a consequence of come on-line round 2025, officers on the three corporations instructed Reuters.

Sinopec Corp, the nation’s prime refiner and primary chemical substances producer, is shifting funding to high-end chemical substances reminiscent of ethylene vinyl acetate (EVA) for photo voltaic panels and large-tow carbon fibre utilized in plane and lighter, stronger wind turbine shafts.

“China is not wanting bulk commodity chemical substances and has entered a part of price competitors,” stated a consultant at Hengli Petrochemical, which is including a 20 billion yuan ($2.77 billion) chemical park subsequent to its petrochemical complicated in Dalian, in northeastern China.

Engineering plastics, uncooked supplies for bio-degradable plastics and electrolytes for lithium batteries, in addition to plastics for the battery separators, are among the many new plant’s predominant deliberate merchandise, stated the Hengli consultant, who declined to be recognized.

Having arrange a specialised battery expertise unit in late 2022, Wanhua Chemical stated in Might it’s going to spend 3.4 billion yuan this 12 months on uncooked supplies for anodes, cathodes, and electrolytes utilized in lithium batteries, China Chemical Information reported in June.

PUSHING POLYOLEFIN ELASTOMERS

Chinese language manufacturing capability for POE, a fabric used for photo voltaic panel encapsulation that resists ultraviolet mild and is extra sturdy than EVA, will surge to 1 million metric tons per 12 months by 2025 from zero at a price of about 20 billion yuan, to fulfill demand that’s set to broaden at double-digit charges, business officers estimated.

A couple of dozen corporations, together with items of Sinopec and PetroChina, are constructing or planning POE capability.

The home provide would partly substitute China’s POE imports, which have grown by a median of 23% a 12 months over the previous 5 years to a document 690,000 tonnes price 13.7 billion yuan in 2022, in line with Chinese language customs.

“China controls 80%-90% of worldwide photo voltaic capability and is dwelling to 90% of photovoltaic encapsulant movie manufacturing, however has zero native manufacturing of POE pellets,” stated NPCPI’s Zhao.

Wanhua and Sinopec are anticipated to be China’s first industrial POE producers, in line with Zhao and Woodmac’s Cui.

In April, Sinopec introduced trial output at its Maoming refinery.

ZPC expects to carry on-line a POE facility that may produce 400,000 metric tonnes per 12 months by 2025/2026, stated an official from Zhejiang’s mum or dad Rongsheng Petrochemical.

“Whoever strikes sooner will win as there might be a surplus, as many are planning (POE crops),” stated Woodmac’s Cui.

($1 = 7.1720 renminbi)