In a study of cost comparison of petrochemical projects across the globe, Nexant, a well-known research organization, has found that China as well as the other Asian regions offer cost competitiveness in the newer petrochemical projects.
Three North Asian countries Japan, South China and Taiwan, dominate the Asian petrochemical industry, and jointly represent about 70% of the world's installed petrochemical capacity. Over the past five years, China's relative importance has increased as it continues as a preferred destination for investments. However, China's petrochemical demand-supply imbalance is the largest in the region, and is expected to continue, despite numerous projects currently being planned or under consideration.

The study profiles a number of variables that impact the cost-competitiveness of petrochemical products in the region. Manufacturing costs have been estimated for leader plants in each country that, in most instances, represent newly built, world-scale plants incorporating the most efficient current process technologies and economies of scale. The products profiled are ethylene, HDPE, LLDPE, LDPE, PP, VCM, PVC, MEG, benzene, styrene, PX, and PTA for those countries currently producing those products, or that have firm plans to start production by 2008. Economic scenarios were developed for 2004 and 2008. The countries covered in the study include China, Japan, Taiwan, South Korea, Thailand, Indonesia, Singapore, Malaysia, Indonesia, India, Philippines, Australia and Vietnam. To put Asian costs in a global context, the economics for leader plants in U.S.A, Western Europe and the Middle East are also provided.

The study highlights the capital cost differences observed in China. Surprisingly, China's capital cost location factor as compared to only a few years ago, declined rather significantly, in contrast to the location factors for other regions that remained relatively stable over the same period. Capital cost is now the key item in differentiating older plants built in China with a high degree of imported services and content, and the plants currently being built in China by both local companies and joint ventures which maximize local content. Local content ranges from engineering, procurement, and construction services, to locally developed technology and key process equipment.

To highlight these differences in capital requirements, Nexant developed two different scenarios for China. One scenario, identified as "Maximizing Local Content," reflects the current practice of maximizing the use of local resources and services offered by Chinese companies and suppliers. This practice allows for sizeable savings in capital costs, thus providing a competitive cost advantage to those plants built with local materials and services.
The alternative scenario, "Minimizing Local Content," is reflective of past practices that relied heavily on imported resources for petrochemical plant construction, with low construction wages being the sole cost-saving benefit.

Nexant compiled the results of the cost of production analyses, and prepared comparisons to illustrate the competitiveness of leader plants in each country covered in the report (provided such facilities existed in 2004 or were highly likely to be completed by 2008), as well as leader facilities in USGC, Western Europe, and the Middle East.