One of China’s biggest refiners, Sinopec Shanghai Petrochemical, is planning to invest 20 billion yuan ($3.27 billion) in a new paraxylene project with a capacity of 1 million tons, the company’s chairman and president Wang Zhiqing announced Tuesday at a press conference in Hong Kong.

The new paraxylene factory is expected to be a major step toward reducing the country’s dependence on imports of the key feedstock for production of polyester. Paraxylene is among the top priorities for Sinopec, which is the largest producer in mainland China with a total output of about 800,000 tons per year.

Wang Zhiqing commented that at present the demand for paraxylene is very high in China and it is estimated that the internal return of the project will exceed 20 percent.

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Figures presented by the China Securities Journal reveal that as many as 5.71 million tons of paraxylene were consumed by the industry in 2012. Roughly 40 percent of this amount came from South Korea, Japan and Taiwan, explained Wu Fei, an analyst at Bocom International Securities.

Wu also stated that demand for paraxylene was likely to grow at an annual rate of 25 percent, providing market opportunities for increased capacity. Data from Internet portal Tencent shows that some three million tons of capacity is currently at various stages of construction, the South China Morning Post reported.