CHINA BUILDING 2 ETHYLENE PLANTS TO MEET SOARING DOMESTIC DEMAND

CHINA BUILDING 2 ETHYLENE PLANTS TO MEET SOARING DOMESTIC DEMAND

Work is under way on two more large petrochemical plants in southern China, as the country struggles to meet soaring demand but cut imports costing hundreds of millions of dollars a year.

Construction began last week on an ethylene plant with annual output of 300,000 metric tons at Maoming in Guangdong province. Two days earlier, ground was broken for a 115,000-metric-ton ethylene project in nearby Guangzhou, the provincial capital.The first is a joint venture between state-owned China Petrochemical Corp. and the provincial government, requiring investment of 11 billion yuan ($1.9 billion), including foreign funds of $750 million.

In addition to ethylene, a building block for many plastics, the Maoming plant will produce 100,000 metric tons of polyethylene, 70,000 metric tons of polypropylene, 80,000 of styrene and 50,000 of polystyrene.

Key production equipment and facilities are being imported from the United States, Japan, Italy and Finland. The plant is due to open in mid-1996.

The second installation is being built jointly by Guangzhou city and China Petrochemical at a cost of some 4.7 billion yuan, including $350 million of foreign funds. It will be completed at the end of 1995.

Guangdong province, adjacent to Hong Kong, is China's fastest-growing area and home of most Hong Kong manufacturing. It absorbs more foreign investment than any other area in China and accounts for a quarter of the country's exports.

The province's industries need more than one million tons of plastics a year to feed light industry, building materials, food packing and electrical appliance industries.

It produces only about 300,000 metric tons yearly, adding to the country's import bill. Chinese economists estimate the two new projects will provide at least 60 percent of provincial demand, but it's not clear whether that is based on current figures or anticipates future growth.

Overall, China has ethylene capacity of 2.2 million metric tons, official figures show. Demand is forecast to hit five million metric tons by the end of the decade, against output then of around four million metric tons.

National output of plastics of all kinds was 5.36 million metric tons last year, up from 4.3 million in 1991. Officials are forecasting a jump to eight million metric tons by the year 2000.

As Chinese living standards improve, demand is growing for consumer items using plastics. Between 1981 and 1990, China spent more than $50 million to import plastic extruders.

It laid out $34 million to buy extruder design and manufacturing technology

from Germany's Battenfeld Fischer in hopes of cutting costs by using local components.

China's largest petrochemical undertaking, Shanghai Petrochemical Co., signed an accord last month with two Japanese partners to produce and sell a range of polypropylene products.

Half the $9.5 million start-up costs will come from Shanghai Petrochemical, C. Itoh & Co., a trading firm, and Chisso, a Japanese petrochemical company. The rest is to be raised through bank loans guaranteed by the partners.

Shanghai Petrochemical will provide resin supplies, Chisso will transfer technology and management expertise and C. Itoh will help with marketing abroad.