China Market Insider Tianjin to Become the Leading Center for Petrochemicals in Northern China

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Tianjin, China's fourth largest city relies more and more on the petrochemical industry for its economic development. The city government and Sinopec, China's largest state-owned chemical company have signed a new framework agreement according to which an additional 70 billion yuan (around 10.3 billion dollars) will be invested in key projects in Tianjin.

Beijing/China – Sinopec and the local authorities want to jointly promote petrochemical plants, as well as natural gas and hydrogen projects in the administrative area of Tianjin. The aim is in particular to build a ‘world-class petrochemical site’ in the ‘Tianjin Nangang Industrial Zone’.

The Tianjin Nangang Industrial Park is a 200 sq. km industrial area that has been created since 2009 mainly on land reclaimed from the sea and now protrudes like a floating test tube city into the Bay of Bohai. According to the plans of the Beijing headquarters, it will soon play in the big league of leading petrochemical locations in China, which are usually located in southern provinces like Guangdong and Fujian or in the eastern province of Zhejiang.

The success or failure of this industrial policy move is of great importance to Tianjin, as just two years ago the city's economic growth fell far behind other metropolitan areas in China due to mismanagement and corruption scandals. A huge chemical explosion in the Binhai Development Zone, which includes the Tianjin Nangang Industrial Park, killed 173 people, seriously damaged the location's reputation in 2015.

But now leading state-owned companies like Sinopec as well as state competitors like Petro China and Cnooc are helping the city. All the three firms are already active in Tianjin and, like three aircraft carriers, feed their armada to a chemical cluster of 120 companies of various sizes. This cluster is expected to massively expand over the next five years.

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At the end of the 14th five-year plan, which begins in 2021, Tianjin Nangang will also have ethylene-propylene plants, polyurethane and lubricant plants, production plants for power batteries and the use of alternative, clean energy sources such as natural gas, reports PROCESS in China. The Group's previous investments in Tianjin will be doubled through the framework agreement from Sinopec alone. There are also question marks for the industry about the location, including the rapidly aging population in Tianjin. Tianjin is only about half an hour's journey by express train from central Beijing, which also has an impact on wages.

But the communist state and party leadership in Beijing definitely wants to help the mega-city cluster ‘Beijing-Tianjin-Hebei’, a favourite project of the Chinese state and party leader Xi Jinping. In the long term, the chemical industry will also be concentrated in a few, more controllable industrial parks, in order to make accidents like the catastrophic explosion in August 2015 more difficult. Tianjin Nangang and petrochemicals play a central role in all of these planned economy considerations.

One of the specific projects that will be jointly funded by the local government and Sinopec is an ethylene composite site with an annual capacity of 1.2 million tonnes and corresponding subordinate industries.

The third phase of the ‘Sinopec Tianjin LNG’ project will also be expanded. “In the Tianjin Nangang petrochemical park, ‘the fast-forward button’ is being pressed,” comments Zhonghua Xinwang, an online news portal for the Chinese chemical newspaper Zhongguo Huagong Bao.

While the geographic location of the industrial park is not bad—between the metropolitan areas of Tianjin and Beijing and Bohai Bay in the Yellow Sea—work on the local infrastructure still needs to be done, according to the Chinese media reports. The ‘Tianjin-Nangang Railway’ is not expected to be operational until the end of this year, and only the first phase of the necessary road network has been completed so far. Signals such as the framework agreement that has been signed with Sinopec suggest, however, that this expansion will now proceed quickly.

* * Henrik Bork, long-standing China correspondent of the German newspapers 'Süddeutsche Zeitung' and 'Frankfurter Rundschau', is Managing Director at Asia Waypoint, a consulting agency specialising in China and based in Beijing. "China Market Insider" is a joint project of Vogel Communications Group, Würzburg/Germany, and Jigong Vogel Media Advertising in Beijing/China

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