Chinese oil refiners and petrochemical companies are on an investment spree to produce high-end chemicals for solar panels and lithium-ion batteries to reap profits from the growing demand for energy transition technologies. The investment is estimated to be around tens of billions of dollars.
With this, China aims to reduce its import dependence and further strengthen its dominance of renewable energy and electric vehicle supply chains. The Chinese companies are competing against Dow Chemical, Exxon Mobil and BASF in making key materials.
As per industry analysts, firms including Wanhua Chemical, Zhejiang Petrochemical Corp (ZPC) and Hengli Petrochemical and state oil giant Sinopec Corp are leading the shift. They are moving to manufacturing higher value products such as polyolefin elastomers (POE) used to protect the cells on solar panels, ultra-high-molecular-weight polyethylene for lithium-ion battery separators and carbon fibre for wind turbine blades, said the analysts.
“Overcapacity and weak demand for commodity chemicals, and China’s rapidly growing industries like solar, electric vehicles are the key drivers for companies to extend into high-end, high performing materials,” said Kelly Cui, Shanghai-based principal analyst with consultancy Wood Mackenzie.
It will help country to make key new materials and strengthen domestic supply chains, thus building China’s status as the world’s biggest manufacturer of electric vehicles, EV batteries and solar panels.
“Companies are moving towards serving the new energy sectors where China is already leading in manufacturing,” said Zhao Tongyang, Deputy Chief Engineer at the China National Petroleum and Chemical Planning Institute (NPCPI).
As per reports, Sinopec Corp, the country’s top refiner and basic chemicals producer, is moving towards investing in high-end chemicals such as ethylene vinyl acetate (EVA) for solar panels and large-tow carbon fibre used in aircraft and lighter, stronger wind turbine shafts.
“China is no longer short of bulk commodity chemicals and has entered a phase of cost competition,” said a representative at Hengli Petrochemical, which is adding a 20 billion yuan ($2.77 billion) chemical park next to its petrochemical complex in Dalian, in northeastern China.
As per local reports, with specialised battery technology unit set up in late 2022, Wanhua Chemical said recently that it will spend 3.4 billion yuan this year on raw materials for anodes, cathodes, and electrolytes used in lithium batteries.
“China controls 80%-90% of global solar capacity and is home to 90% of photovoltaic encapsulant film manufacturing, but has zero local production of POE pellets,” said NPCPI’s Zhao.