Petrochemical Industry 2022 Annual Strategy: Biodegradable Plastics and Recyclable Plastics Create New Growth Drivers

As a leading domestic coal chemical enterprise, the company excels in cost control, and its multi-product flexible production capability further enhances operational flexibility. The company’s strategic layout across two key raw materials—BDO and adipic acid (AA)—ensures high profitability certainty for its PBAT segment. Coupled with capacity expansions in other segments—including amides, nylon new materials, and DMF—the company has cultivated a series of new growth drivers to support further expansion. Zhongtai Chemical The company holds a 25% equity stake in Xinjiang Meike Chemical Co., Ltd., a joint venture and currently China’s largest BDO producer, with an annual BDO capacity of 260,000 tons. Recently, Xinjiang Meike publicly disclosed the first round of public consultation on the environmental impact assessment (EIA) for its new 60,000-ton-per-year PBAT project. In addition, progress updates on the EIA for Meike’s Phase IV 100,000-ton-per-year BDO project have also been released. These developments will further consolidate Meike’s leadership in the BDO sector and open up new growth space through its vertically integrated positioning along the PBAT value chain, leveraging its raw material advantages. Jindan Technology The company is a leading domestic producer of lactic acid and its derivatives, with a total production capacity of 128,000 tons of lactic acid and related derivatives—commanding over 60% of the domestic market share. The company has successfully broken through technical bottlenecks in producing propylene glycolide (PLA’s upstream critical raw material), with its 10,000-ton-per-year propylene glycolide production line having completed trial operation and commenced stable production, as announced. It plans to advance construction of an integrated project comprising 200,000 tons/year of lactic acid and 100,000 tons/year of polylactic acid (PLA), thereby strengthening its vertical integration across the PLA value chain. Additionally, the company has launched a public EIA notice for its 60,000-ton-per-year PBAT and downstream products project. Its dual-track development strategy across both PLA and PBAT value chains diversifies its product portfolio and significantly enhances operational flexibility. Donghua Technology As a leading engineering contractor specializing in coal-to-ethylene glycol and other sectors, the company maintains extensive business relationships with numerous coal chemical enterprises. Amid the current wave of transformation in the coal chemical industry and the rapidly expanding market for biodegradable plastics, the company stands to achieve accelerated revenue growth by undertaking EPC (Engineering, Procurement, and Construction) contracts for biodegradable plastic projects. Moreover, its collaborative facility construction with Xinjiang Tianye enables it to secure future revenues from chemical product sales generated by the project—broadening income sources and mitigating volatility arising from fluctuations in engineering workload. This supports the company’s industrialization strategy, facilitating its gradual transition from a pure chemical engineering service provider into a dual-pillar “engineering + industrial operations” enterprise. The company’s earnings growth outlook rests on two pillars: (i) increased EPC business volume in high-growth sectors such as the biodegradable plastics and new energy industries; and (ii) earnings elasticity derived from its jointly built PBAT facility with Xinjiang Tianye. 3.2 PET Bottle Flakes Industry We have identified key enterprises in the PET bottle flakes industry operating at mid- and downstream stages of the value chain—including Sanfangxiang, China Resources Materials, and Zi Jiang Enterprise—that stand to benefit from both relaxed upstream supply of PX and MEG and robust end-market demand, alongside consumer goods companies’ ongoing packaging upgrades. Sanfangxiang The company primarily produces PET bottle flakes and purified terephthalic acid (PTA), occupying a midstream position in the PET bottle flakes value chain. Its current annual production capacity exceeds 2.2 million tons for bottle-grade polyester chips and approximates 2.9 million tons for PTA. The company has announced phased capacity expansions and upgrades for its existing bottle flakes and PTA production facilities.

In-Depth Research Report on PetroChina: Sustained Medium-to-High Oil Prices Drive Comprehensive Profitability Improvement Across Oil & Gas Leaders

The Guangdong Petrochemical Project will increase the company’s refining capacity to 127 million tons. As PetroChina’s largest ongoing construction project in recent years, the Guangdong Petrochemical Integrated Refining & Chemical Complex will raise the company’s refining capacity from 107 million tons to 127 million tons and its ethylene processing capacity from 6.34 million tons to 7.54 million tons. Combined with the Lanzhou and Tarim projects, its ethylene processing capacity will reach 8.94 million tons, substantially enhancing PetroChina’s petrochemical processing capabilities. Steadily advancing the strategy of ‘reducing oil output while increasing chemical production’ to optimize structure and enhance added value The company has long adhered to optimizing production layouts and product structures, rationally adjusting diesel–gasoline ratios, and vigorously pursuing oil reduction and chemical expansion. Aligning with market demand, it maintains high-load operation of chemical plants to boost output of high-value-added products. In 2020, the company produced 107.042 million tons of refined oil products—a 9.1% year-on-year decline; produced 6.345 million tons of ethylene—a 8.2% year-on-year increase; and produced 28.853 million tons of chemical products—a 12.0% year-on-year increase. Upholding the ‘molecular refining’ philosophy, the company optimizes crude oil resource allocation based on plant configurations and regional conditions. It adjusts product portfolios according to market demand, intensifying efforts to reduce oil output and expand chemical production—increasing output of high-value-added refining products including premium gasoline, aviation fuel, paraffin wax, lubricants, asphalt, and low-sulfur marine fuel. It sustains high-load, long-cycle operation of chemical plants, accelerates development of new materials and new products, and raises the proportion of high-end, high-value-added specialty chemical products. Through deepened benchmarking management and continuous improvement of economic and technical indicators, the company enhances its overall product yield. Key projects—including the Daqing Petrochemical Refining Structure Adjustment and Upgrade Project, the Lanzhou Petrochemical Ethylene Capacity Restoration Project, and several initiatives to boost aviation fuel and low-sulfur marine fuel output—have been completed and commissioned. Major ongoing projects—including the Guangdong Petrochemical Integrated Refining & Chemical Complex, the Tarim and Changqing ethane-to-ethylene projects—are progressing steadily. Downstream refining and chemical products command high added value and represent one of the company’s most profitable businesses. In 2019 and 2020, the gross margin of the company’s refining and chemical segment stood at 26.7% and 26.03%, respectively—higher than that of its oil and gas marketing segment. In 2020, amid the pandemic, domestic chemical production and sales were suppressed during the first half of the year. However, as oil prices rebounded and resumption of work and production accelerated in the second half, demand gradually recovered—and surged sharply in the third quarter—driving rapid market recovery for chemical products. Particularly, overseas pandemic escalation led to refinery shutdowns and reduced chemical imports, helping stabilize domestic plastic prices. In 2021, international crude oil prices rose amid volatility, while China’s macroeconomy stabilized and recovered. Demand for oil and gas products increased year-on-year. The company strengthened oil and gas exploration and development, deepened structural adjustments and transformation in refining and chemical operations, and steadily advanced its strategic layout in new energy and new materials. As a result, its chemical products are expected to generate stronger returns in 2021. Marketing Business: Steady Development of Oil & Gas Marketing; Hydrogen Refueling Station Deployment Supports Carbon Neutrality The marketing business constitutes PetroChina’s largest revenue source. From 2018 to 2019, revenue from oil and gas distribution accounted for approximately 85% of total revenue; in 2020, this share declined slightly to 75% due to pandemic impacts. In 2020, approximately 40% of PetroChina’s refined oil products were sold overseas, reinforcing its role as a major international oil and gas service provider.

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