Sinopec and INEOS Swap Shares to Develop High-end Chemical Market

Sinopec and INEOS share swap

INEOS and Sinopec signed a series of joint venture cooperation agreements on July 28, 2022, with a total value of approximately US$7 billion
.
The three landmark agreements are expected to achieve a combined annual production capacity of 7 million tons and generate approximately $10 billion in annual sales
.
The contents of the agreement include: Sinopec transfers 50% equity of Shanghai Secco, and Shanghai Secco will be jointly operated by Sinopec and INEOS; Sinopec acquires 50% equity of INEOS Styrolution High-tech Materials (Ningbo) Co.
, Ltd.
2 sets of 300,000 tons/year ABS resin production capacity to jointly develop the domestic ABS product market; the two parties will establish a joint venture company in Tianjin based on a 50%:50% equity ratio to build a new 500,000-ton/year high-density polyethylene (HDPE) project; It will also use INEOS technology to jointly build at least two 500,000-ton/year high-density polyethylene (HDPE) plants to meet the domestic market demand for high-end HDPE products
.

INEOS and Sinopec signed a series of joint venture cooperation agreements on July 28, with a total value of about US$7 billion
.
The three landmark agreements are expected to achieve a combined annual production capacity of 7 million tons and generate approximately $10 billion in annual sales
.

This cooperation will reshape the production and technology layout of INEOS in the petrochemical industry in China
.
The three joint venture projects between INEOS and Sinopec include:

First, INEOS will acquire a 50% stake in Shanghai Secco Petrochemical Co.
, Ltd.
(“Shanghai Secco”), a subsidiary of China Petrochemical Corporation (SINOPEC)
.

Second, INEOS and Sinopec will jointly establish a new joint venture company with a 50%:50% equity ratio, aiming to achieve 1.
2 million tons/year ABS production capacity to meet the rapidly growing demand in China
.
The ABS project with an annual production capacity of 600,000 tons is located in Ningbo and is currently under construction by INEOS Styrolution.
It is planned to be mechanically completed by the end of 2023 and the project will become part of the joint venture
.

INEOS and Sinopec also plan to cooperate and use INEOS' world-leading Terluran® ABS technology to build two other ABS projects with a production capacity of 300,000 tons per year
.
One of the ABS projects with a capacity of 300,000 tons/year will be located in Tianjin, and the location of the third project has not yet been determined
.

According to the third agreement, INEOS and Sinopec will jointly establish a joint venture company based on a 50%:50% equity ratio to build a new 500,000-ton/year high-density polyethylene (HDPE) project in Tianjin
.
In addition, INEOS and Sinopec will build at least two 500,000-ton/year high-density polyethylene (HDPE) projects in the future to license the production of INEOS pipe grade products
.
The Tianjin project is expected to be FEED and mechanically completed by the end of 2023
.

Since INEOS acquired the acetyl and aromatics business of British Petroleum (bp) in January 2021, INEOS has established a basis for friendly cooperation with Sinopec
.
Based on the multi-faceted business cooperation between the two parties for more than 20 years, INEOS and Sinopec have been familiar with each other for a long time, and the cooperation between the two parties will be closer and tacit understanding in the future
.

Through closer joint venture cooperation, Sinopec will obtain a number of world-leading downstream technology licenses from INEOS.
At the same time, INEOS will also obtain a larger business scale in the world's fastest growing Chinese market
.

Shanghai Secco was established in November 2001.
Its predecessor was a Sino-foreign joint venture limited liability company funded by Sinopec, Shanghai Petrochemical and BP East China Investment Co.
, Ltd.
, with a total investment of more than 3 billion US dollars
.
As of the end of December 2021, the company has achieved a total profit of 4.
066 billion yuan
.
Located in the Shanghai Chemical Industrial Park, the factory covers an area of ​​200 hectares and currently has an annual production capacity of 4.
2 million tons of petrochemical products, including ethylene, propylene, polyethylene, polypropylene, styrene, polystyrene, acrylonitrile, butadiene, benzene and toluene
.

Headquartered in Basil, Switzerland, INEOS is one of the top five chemical companies in the world
.
It has 36 business segments and 194 production bases in 29 countries around the world, and has a number of chemical technologies including polyethylene, polypropylene, acrylonitrile, etc.
Among them, acrylonitrile, styrene, phenol, linear alpha olefin and ethanolamine are technologically advanced Ranked first in the world
.
INEOS Styrolution High-tech Materials (Ningbo) Co.
, Ltd.
was registered and established in Ningbo on August 8, 2019, mainly engaged in the research, production, development, design, wholesale, import and export of ABS general materials and special materials synthetic resin or petroleum resin and after-sales service
.

Develop high-end chemical market

Sinopec acquired a 50% stake in INEOS Styrolution Materials (Ningbo) Co.
, Ltd.
for the ABS product market, so what is ABS? How is the global market situation? Let's take a look
.

▶Acrylonitrile-butadiene-styrene resin (abbreviated as ABS resin) is a thermoplastic polymer material with high strength, good toughness and easy processing.
It combines the impact resistance of butadiene and the rigidity of acrylonitrile.
And chemical corrosion resistance, gloss and formability of styrene, can maintain good formability in the temperature range of -25 ~ 60 ℃, the surface of processed products is smooth, easy to color, easy to electroplating, widely used in home appliances , office, office, automobile and other fields
.

▶During the period from 2021 to 2025, China's ABS resin industry will show a trend of high profitability and high demand growth, which has attracted the attention of many Chinese petrochemical enterprises
.
According to statistics, from 2021 to 2026, more than 18 domestic manufacturers will deploy new ABS production capacity in East China and South China
.

▶By the end of 2021, the annual production capacity of ABS in China has reached 4.
675 million tons, an increase of 11.
7% over the same period of the previous year; the total annual production volume has reached 4.
555 million tons, an increase of 11.
7% over the same period of the previous year; the total number of companies is 13, Ningbo Le Jinyongxing, Zhenjiang Chimei, Jilin Petrochemical, Ningbo Taihua, Tianjin Dagu
.

China is the largest consumer of ABS resin in the world.
Due to its own lack of production capacity and low supply of special grades, the domestic market needs a large amount of ABS imports to supplement each year
.
From 2017 to 2021, the average annual import volume of ABS in China was about 1.
923 million tons, especially from 2018 to 2020, the import volume exceeded 2 million tons for three consecutive years
.
In 2021, China will import 1,755,300 tons of ABS, a year-on-year decrease of 262,100 tons, and the import dependence will drop from 32.
7% in 2020 to 28.
2%
.
Import sources mainly come from Taiwan Province of China, South Korea and Malaysia, accounting for 41%, 30% and 11% of total imports respectively
.

Therefore, Sinopec acquired a 50% stake in INEOS Styrolution High-tech Materials (Ningbo) Co.
, Ltd.
, which is a planned cooperation, using INEOS' world-leading Terluran® ABS technology to build an ABS project
.

2022-2025 Statistical table of some domestic ABS new production capacity and production plans (unit: 10,000 tons/year)