Cost of meeting new environmental rules likely to be passed on to customers
A warning has been sounded that prices for clothes, household goods and other plastic products could rise across the mainland as the petrochemicals sector seeks to comply with new stringent environmental laws.
Scores of new projects, including a British Petroleum chemical plant in Zhuhai , face an uncertain future after the State Environmental Protection Agency (Sepa) last week outlined the results of a two-month nationwide audit of 127 chemical producers.
The high cost of complying with environmental standards would inevitably be passed on to consumers, analysts said. Record oil prices, combined with widespread overinvestment in China's petrochemicals sector, have squeezed profit margins among midstream producers for the past few years.
However, in recent months, demand appears to have been catching up with supply, allowing some petrochemical companies to stabilise their prices, which are allowed to move with market demand instead of being set by the government.
'On a company level, the crackdown would inevitably increase operating costs because the petrochemicals sector would have to improve or upgrade facilities to maintain safe operating environments,' DBS Vickers analyst Gideon Lo said.
