A group led by Taiwan's USI Corp. is planning to build naphtha crackers at a petrochemical complex partly owned by China Petrochemical Corp. in the Gulei Petrochemical Zone in Zhangzhou city, located in China's eastern Fujian province for which Taiwan's government on Monday gave its approval

The naphtha crackers at a petrochemical complex in China will be build with an investment of US$263.6 million. The crackers are expected to produce ethylene and propylene. This is the first approval since lifting a ban on investments in China's downstream petrochemical industry in early October.

Analysts are of the view that that Taiwan's downstream petrochemical companies might face a shortage of the feedstock. Taiwan is a net importer of ethylene, producing 3.47 million metric tons in 2012 according to the latest available data and importing around 348,000 tons.

An official from the ministry added that the consortium has agreed to ship the output from Gulei back to Taiwan in case of a local shortage. The plan hasn't yet garnered approval from the Chinese authorities and is likely to take two years before production begins.

Formosa Plastics Group, is one among the most active Taiwanese petrochemical firms has flagged an interest in building ethylene plants in Zhejiang and Fujian provinces in China. It currently produces petrochemical products such as ethylene glycol and polyvinyl chloride in its Ningbo petrochemical complex in Zhejiang province.

The removal of restrictions came as economic exchanges across the Taiwan Strait. The petrochemical producers of Taiwan are searching for new sites to build more naphtha crackers to help meet the rising domestic demand in the country.