China's Dalian Fujia plant runs normally despite shutdown order

Authorities in Dalian in northeastern Liaoning province ordered the Fujia plant to be shut down immediately on Sunday after thousands of local residents demonstrated, demanding the relocation of the factory at the center of a toxic spill scare.

The plant, one of the country's leading importers of naphtha, is carrying on normal shipments of naphtha from regular suppliers such as Iran and Papua New Guinea, according to the source.

"The plant is running normally ... there is no notice for operation changes," said the source with direct knowledge of the plant's operations.

The Fujia plant, jointly owned by local government-backed Dalian Chemical Group and private real estate company Fujia Group, imports 100,000-120,000 tonnes of heavy naphtha a month, according to two trading sources.

The industry source said while the plant was running normal for now, it remained unclear what would happen later.

Calls to the Dalian government went unanswered.

According to shipping fixtures and a trading source, there is at least one medium-sized naphtha cargo booked for loading late August from Port Noresby and one or two cargoes from the National Iranian Oil Company.

"I think the Dalian government is under big public pressure to order the shutdown, but at the same time authorities have to consider that Fujia is a big tax payer for Dalian," said a Beijing-based oil trader.

"If it's a complete shutdown, it will have major impact on naphtha and petrochemicals market."

Naphtha, a refinery product, can be used as feedstock to produce PX, which is an intermediate to make polyester.

Demonstrators in Dalian faced down a wall of riot police in front of the municipal government office on Sunday, according to eyewitness accounts. Minor scuffles broke out, although there was no report of injuries among the 12,000 protestors, official Xinhua news agency has said.

The government on Sunday also pledged to relocate the Fujia Chemical Plant, Xinhua said, citing a statement from the municipal committee of the Communist Party and the government. The report did not say where the plant was likely to move to.

Earlier on Sunday, in a rare concession, Dalian's Communist Party chief Tang Jun and mayor Li Wancai "tried to appease the crowd by promising to move the polluting project out of the city," but some protesters said they would refuse to move until a clear timetable was given.

Dalian, home to China's aircraft carrier and with about 6 million residents, is the second-biggest city in Liaoning, which recently suffered an oil spill from two offshore platforms that hurt tourism and aquatic farming businesses.

Environmental worries in China have stoked calls for expanded rights for citizens in the one-party state, but the Sunday protest has extended it to calls for more government accountability, highlighting the mistrust that Dalian residents have in its leaders.

According to Southern Metropolis News, the Fujia plant started full-scale production in June 2009, but it did not get the mandatory environmental approval from the Liaoning environmental protection bureau until April last year.

The plant, one of China's largest PX producers, contributes 2 billion yuan ($311 million) to the local government in the form of taxes every year, Xinhua said.

The chemical PX can cause eye, nose or throat irritation and chronic exposure may result in death.

(Reporting by Chen Aizhu; Additional reporting by Sabrina Mao; Luke Pachymuthu and Seng Li Peng in Singapore; Editing by Ken Wills, Himani Sarkar)