Sinopec has initiated its first direct investment in a new blending plant in Singapore and other major Chinese majors are concluding barter arrangements in Iran and Venezuela to secure access to long term resources – expect movements in Libya soon. In essence, the level of China’s investment in exploration and new facilities, whether refineries or blending plants, continues at a substantial pace.
However, this is now taking place against a rather different economic backdrop from what was previously expected. China’s Manufacturing Purchasing Managers Index (PMI) fell to 48.9 down from 50.1. Officially this is a contraction in the economy. Compared with two months ago the economic issues seem starker. Europe and the US are not going to provide the driving force for the world economy and China will need to re-balance towards internal, consumer-led activities.
In economic terms people seem to be worried about inflation, though a slowdown in GDP to below 10% is healthy. On the other hand a widely featured report in the Financial Times highlighted a study which suggested that Steel production in China was higher than previously indicated by official figures. So, once again, the challenge of statistical accuracy continues.
Five years ago bicycles thronged the streets in Shanghai. During a recent visit, there were significantly fewer bicycles, but an increasingly major traffic hazard from the exploding electric scooter population. There are early discussions that the centre of cities such as Shanghai may become free from the internal combustion engine altogether.
It is also interesting to see the ever changing vehicle population. No longer content with old models re-hashed for China, the streets are full of new models from both JV's and local suppliers. As in the USA, the way forwards seems to be the petrol hybrid rather than a shift to diesel.
Each of these changes will continue to place the emphasis on less pollution and better quality lubricants. The rapid adoption of CN4 nationwide is an indicator of the desire to catch up with international levels of specifications and with challenge each level of the supply chain.
However, a strong dose of reality has been administered to China’s positive outlook. The recent oil spills in the North China Sea and onshore refinery fires, combined with an highly critical report of China’s overseas oil investments from the country’s University of Petroleum, has given the oil industry pause for thought.
At the same time, the recent tragic high-speed rail crash in Zhejiang has led to public, and even governmental, calls for China’s drive to demonstrate its technological prowess to the rest of the world to be slowed in the interests of safety.
OATS will continue to monitor developments and keep you informed.
To end on a practical note, we are continuing to build the OATS equipment database with the recommended lubricants. We’re also delighted to bring you the first Mandarin version of the OATS China Bulletin – a further commitment to our investment in China and our Chinese customers. To find out more, or contribute to either the database or the Bulletin, please contact Diana Shen.
Sebastian Crawshaw
Chairman