The state-controlled petrochemical manufacturing sector will continue to see inefficient plants closed amid difficult market conditions and growing foreign competition, but no major industry restructuring is expected, according to analysts. Their comments follow profit warnings by Sinopec Yizheng Chemical Fibre and Sinopec Shanghai Petrochemical, subsidiaries of China Petroleum and Chemical (Sinopec), and by Petrochina subsidiary Jilin Chemical. Sinopec Yizheng and Sinopec Shanghai expect to post year-on-year profit declines of more than 50 per cent for last year, while Jilin Chemical expects an operational loss. The petrochemicals sector has been hurt by weak demand for plastics and textile fibres, as well as greater product price falls compared with those of the main raw material, crude oil. Regional excess capacity and the emergence of Middle Eastern producers increased pressure on Chinese producers, which tend to have old and inefficient facilities. Falling tariffs since China joined the World Trade Organisation also put pressure on domestic companies, raising the question whether the sector might need restructuring to stay afloat. In 1998, an industry overhaul saw oil production, refining and petrochemical production restructured into two giants - Sinopec dominating the south and PetroChina the north. The overhaul was partly aimed at listing the two and funding an upgrade of facilities and the construction of new plants to make them competitive. BNP Paribas Peregrine analyst Eva Chu said: 'I think the painful restructuring has already been done in 1998. It would be difficult to make any more major asset swaps. Now the focus is on staff reduction, closure of inefficient plants and introducing foreign funds and technology to construct more efficient plants.' ABN Amro analyst Kanas Chan said PetroChina had indicated it would close seven refineries and petrochemical plants involving 27 facilities by 2005. Sinopec's subsidiaries were also spending billions of yuan to revamp facilities while closing old ones. Analysts said Beijing would be unlikely to help the H-share petrochemical firms revitalise through mergers as little synergy could be gained because they were widely dispersed and the plants were small. Jilin Chemical, which recorded a net loss of 835.99 million yuan (about HK$783 million) in 2000 - among the worst losses suffered by H-share companies in the past few years - is expected by analysts to lose about one billion yuan for last year. Its net loss was 641.89 million yuan in the first half. After bearing costs of 900 million yuan relating to old production facilities and the laying off of 7,000 staff, Jilin Chemical is expected to make huge write-offs on the 532 million yuan of receivables it held on June 30 last year. Ms Chu said she would not rule out the possibility of plant closures by Jilin Chemical.