Joint Ventures in China Provide Lifeline for Petrochemical Industry

01-Mar-2012 - China

The booming demand for petrochemicals in China is encouraging joint ventures that demonstrate global co-operation, a new report by business intelligence expert GlobalData has found.

The new report found that companies from the developed world are working with developing market China to match their advanced technology with newly expanding petrochemicals opportunities in the country.

The petrochemicals industry has undergone rapid changes in the last decade, witnessing China surpassing North America and Europe as the largest petrochemical consumer due to impressive demand from its large population. Growing Chinese demand provides joint venture opportunities for petrochemicals producers from other regions, and many planned projects in the region are established under joint ventures.

China's government has focused on industrialization and urbanization, leading to the recent development of the Chinese petrochemicals industry. China's attempts to match production capacity to the growing demand necessitates the construction of additional petrochemical plants, which provides joint venture opportunities for foreign companies, making the country a catalyst of growth within the global petrochemicals industry. It has become crucial for some major petrochemical producers to develop a presence in China, in order to benefit from significant revenue and maintain a place in the modern market.

Petrochemicals companies worldwide rely upon joint ventures to cope with changing business dynamics in the industry. While Europe and North America suffered significantly from the global economic crisis, the effects were relatively mild in China due to strong government support and resilient end-use sectors. A significant increase has therefore occurred in joint ventures during the last five years, seeing European and North American companies sharing their advanced petrochemicals production technologies with within the Asia-Pacific's lucrative developing market.

The Asia-Pacific was home to 27 new joint venture deals during 2010, representing a majority 58% share of global joint venture deals in the year – and this number is only likely to increase.

GlobalData analysis states that demand in China for basic petrochemicals and major plastics stood at 124.703 million metric tons per annum (mmtpa) in 2010, and is forecast to reach 215.033 mmtpa by 2015 at a Compound Annual Growth Rate (CAGR) of 11.5%. Basic petrochemicals and major plastics production increased from 29.475 mmtpa in 2000 to 95.952 mmtpa in 2010 at a CAGR of 12.5%, and is expected to reach 164.642 mmtpa in 2015.

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