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MarketScreener Homepage  >  Equities  >  SHENZHEN STOCK EXCHANGE  >  Zhejiang Satellite Petrochemical Co Ltd    002648   CNE100001B07

ZHEJIANG SATELLITE PETROCHEMICAL CO LTD

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Zhejiang Satellite Petrochemical : China's Zhejiang Satellite wins approval for $4 billion petchem plant to use U.S. ethane

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08/29/2019 | 03:50am EDT

SINGAPORE (Reuters) - A large Chinese chemical producer has won regulatory approval to start building a 30 billion yuan ($4.2 billion) petrochemical complex in east China to process ethane from the United States, a company official said on Thursday.

Zhejiang Satellite Petrochemical Co Ltd plant will be the second China-based petrochemical facility aiming to cash in on cheap and abundant U.S. ethane unlocked by the shale revolution in North America, analysts said.

The approval from the Jiangsu provincial government in early August comes amid an escalating trade war between Beijing and Washington, which led to a tariff being imposed on U.S. crude oil for the first time last week. [nL3N25M0V8]

China imposed an extra 5% tariff on ethane last September, taking total import duties to 7%. Even so, ethane from U.S. shale gas offers much fatter margins for producers of ethylene than conventional plants that process naphtha into ethylene, said Kelly Cui, senior analyst with Wood Mackenzie.

The United States is the world's only source of an abundant surplus of the natural gas liquid, analysts said.

Last week, Singapore's SP Chemicals started a 650,000 tonnes per year (tpy) ethylene plant in Taixing in Jiangsu province that partly processes U.S. ethane supplied under a long-term agreement, according to local media and analysts.

"This is the first entirely gas-based cracker to begin operating in China and also the first to import U.S. ethane as a feedstock," said Woodmac's Cui.

Zhejiang Satellite will start construction in September on a 1.25 million tonnes per year (tpy) ethylene plant in Lianyungang in Jiangsu province, Ding Liping, an investor relations officer, told Reuters by phone.

"This is the company's phase-one investment for a total of 2.5 million tonnes per year ethylene production facilities that will process fully U.S. ethane," said Ding, adding that construction was expected to take about a year.

The company, headquartered in Jiaxing in east China's Zhejiang province, will then begin an expansion program to double output to 2.5 million tpy, she said.

Zhejiang Satellite, with a market capitalization of 14 billion yuan ($1.97 billion), is China's largest producer of acrylic acid, a chemical used in making paints and wrapping tapes, where demand has grown sharply due to e-commerce.

The plant is expected to receive its first ethane from U.S. firm Energy Transfer Partners L.P. in the fourth quarter of 2020 under a supply agreement lasting more than 10 years, with annual supplies of about 3 million tonnes, said Ding.

LONG-TERM DEALS

Singapore's SP Chemicals received a 50,000 tonne ethane cargo last week at Taixing for the launch of its facility, according to Refinitiv shipping data.

British chemical firm INEOS is the supplier of U.S. ethane to the Singapore company under a long-term deal with annual volume of around 450,000 tonnes, said Woodmac's Cui.

Both SP Chemicals and INEOS declined to comment.

Zhejiang Satellite is one of more than a dozen Chinese companies that began looking in early 2018 at using U.S. ethane to produce ethylene, amid a broader industry expansion to feed China's hunger for petrochemicals.

However, it is the most advanced in pushing through investments, with heavy spending on terminals and tankers.

Zhejiang Satellite and Energy Transfer also announced plans in March 2018 to set up a joint venture to builds a new export terminal on the U.S. Gulf Coast
to export ethane, with a goal to start commercial service in late 2020. (https://reut.rs/2MIS4Ek)

Zhejiang has also nearly completed an ethane receiving terminal at Lianyungang, including three fully built storage tanks each sized 160,000 cubic metres, said Ding.

It has also ordered six Very Large Ethane Carriers (VLECs) to be built at shipyards in South Korea, with the first vessel due for delivery in the third quarter of 2020, she added.

($1 = 7.0928 Chinese yuan renminbi)

(Reporting by Chen Aizhu; editing by Richard Pullin)

By Chen Aizhu

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Financials (CNY)
Sales 2019 12 072 M
EBIT 2019 1 486 M
Net income 2019 1 328 M
Debt 2019 7 989 M
Yield 2019 0,86%
P/E ratio 2019 11,2x
P/E ratio 2020 9,02x
EV / Sales2019 1,89x
EV / Sales2020 2,26x
Capitalization 14 879 M
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Number of Analysts 8
Average target price 17,33  CNY
Last Close Price 13,96  CNY
Spread / Highest target 35,4%
Spread / Average Target 24,2%
Spread / Lowest Target 0,26%
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NameTitle
Wei Dong Yang Chairman & President
Wen Rong Tang Chairman-Supervisory Board
Man Ying Wang Chief Financial Officer, Director & Vice President
Guo Lin Ma Co-Vice Chairman
Yu Ying Yang Co-Vice Chairman
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