Sinopec’s Cut in Chemical Output to Lift Prices, Analyst Says

Dow Chemical Co. (DOW) and other ethylene producers will obtain higher prices as China Petrochemical Corp. cuts chemical output to bolster domestic fuel supplies, said an analyst at Alembic Global Advisors.

Sinopec Group, as Asia’s biggest oil refiner is known, is halting fuel exports and cutting petrochemical production to boost output of gasoline and diesel for domestic use, the Beijing-based company said in its online newsletter today. It has about 6.5 percent of global supply of ethylene, used to make plastics, Hassan Ahmed, an Alembic analyst, said today.

Sinopec’s cut will make ethylene markets tighter and help price increases exceed 1.25 cents per pound in April and 2 cents in May, the current forecast from Houston-based Chemical Market Associates Inc., New York-based Ahmed said in a note. Ethylene is currently about 54 cents a pound, he said.

Beneficiaries include Dow Chemical, LyondellBasell Industries NV (LYB), Westlake Chemical Co., Industries Qatar and Saudi Basic Industries Corp. (SABIC), he said.

Sinopec may reduce ethylene output by 10 percent in May, ICIS News reported yesterday, citing an unnamed person close to the company.

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