'China, like the rest of the industry, will ultimately be threatened with the burden of overcapacity - potentially even before the end of the decade.'

Global oil and petrochemical giants, including BP, Shell and BASF, had received the central government's approval to build integrated petrochemical complexes with a combined capacity to make 2.3 million tonnes of ethylene a year, while ExxonMobil, ChevronPhilips and Dow Chemical were awaiting the green light to build similar plants capable of churning out a total of 1.8 million tonnes of ethylene annually.

Ethylene is a feedstock used to produce a wide array of downstream chemicals for the plastics, synthetic rubber, resins, polyesters and film industries.

Today, the global petrochemical market is buoyed by fat margins arising from the strong economic recovery, and prices have shot up in tandem with high crude oil prices.

Strong demand for all sorts of chemicals from mainland factories in industries such as toys, textiles, printing, construction, electronics and vehicles will have no problem absorbing the new capacity, according to industry executives.

'Even with BASF's joint venture in Nanjing, BP's in Shanghai and Shell's in Nanhai [in Guangdong], we and industry experts have forecast that China will still import considerable quantities of polymers and chemicals well beyond the time lines that these plants will [come onstream],' Shanghai Secco Petrochemical general manager Gordon Souter said. 'You will hardly see a dent in imports in percentage terms.'

Shanghai Secco is a US$2.7 billion joint venture between BP, China Petroleum and Chemical (Sinopec) and its subsidiary Sinopec Shanghai Petrochemical.

It will feature a 900,000 tonne-a-year ethylene cracker which turns naphtha into ethylene at extremely high temperatures. Subsequent processes will churn out a range of other products such as polyethylene and polypropylene.

BASF is constructing a Euro2.9 billion (HK$27.95 billion) complex with Sinopec, which comes with a 600,000 tonne-a-year ethylene cracker, while Shell is building a US$4.3 billion project with China National Offshore Oil Corp with an annual ethylene capacity of 800,000 tonnes.

For the whole chemical category of polyolefin, which are products derived from ethylene (such as polyethylene and polypropylene), BASF forecast that China's self-sufficiency will not only not rise with the completion of the mega complexes, but actually fall from 65 per cent last year to 55 per cent in 2010.

China's self-sufficiency rate in polyethylene consumption is projected to only rise slightly from 43.75 per cent last year to 45.95 per cent by 2010, according to industry consultants' predictions cited by Shanghai Secco planning and strategy manager Liu Hua.

While domestic production is expected to rise from 3.5 million tonnes to 6.8 million tonnes, imports are projected to rise from 4.5 million tonnes to eight million tonnes in the period.

The figures take into account the new capacity to come on to the market from the six Sino-foreign integrated petrochemical complexes being built or planned, as well as planned facilities expansion by domestic firms such as Sinopec, the country's largest chemical producer.

'When we do an analysis [on the consultants' figures], we also agree with [them] and the general trend appears to be correct,' Mr Souter said.

According to Bernd Blumenberg, general manager of BASF-YPC - the German giant's joint venture with Sinopec Yangzi Petrochemcial - about 30 per cent of the venture's capacity overlaps that of Secco.

However, Secco's Mr Souter said the different market targets and downstream products of the two projects meant there would not be oversupply.

'There is absolutely no doubt in my mind that BASF, BP and Shell can sell all of the products they produce locally,' he said. 'These plants are all designed to displace imports into China.'

Mr Souter said Chinese producers were less competitive on chemical production than their Middle Eastern rivals because they had to import naphtha as feedstock, while the competitors had excess natural gas to be used as feedstock, a much cheaper option.

But Chinese producers have the advantage of being near the world's fastest-growing market while the foreign competitors have to bear considerable freight costs.

The Secco project is scheduled to fully come onstream in the second quarter of next year, a quarter after that of BASF's joint-venture plant.

Mr Souter said the progress was better than expected.