Sinopec Shanghai Petrochemical, the demand for whose products tracks the mainland economy's strength, says first-quarter chemical demand remains lacklustre despite a slight improvement from the fourth quarter of last year.
The firm's profitability has also improved from the fourth-quarter's net loss of 481.63 million yuan (HK$591 million) on the back of two price hikes in petrol and diesel, which the firm also produces besides petrochemicals, although the improvement is not sizeable, said chairman Rong Guangdao.
'Chemical prices have gone up 3 per cent in the first quarter but the cost of our raw material - crude oil - has also gone up and has remained high for a long time,' he said. 'Export sectors such as textile and other light industries remain weak, and so does domestic consumption, as reflected in property and automobile sales.'
Mainland exports grew 7.6 per cent year on year and imports grew 6.9 per cent in the first quarter, their slowest since the global financial crisis in 2009. Trade growth may remain in single-digits in the next few months, says a Citi research report.
Sinopec Shanghai operates the second largest refinery of oil producer and refining major China Petroleum & Chemical (Sinopec). It also produces a wide range of basic chemicals such as ethylene and polypropylene, and higher value-added fine chemicals.
As a result of Beijing's refusal to raise fuel prices in tandem with international crude prices to counter inflation, Sinopec Shanghai last month posted an operating loss of 453 million yuan in oil refining for last year, compared with a profit of 1.14 billion yuan in 2010.