09 December 1996 00:00 [Source: ACN]
THAI PP buyers are staying away from markets as they wait to see what impact Thailand's reduction in import duty and the startup of new capacity will have on domestic prices.
The Thai government plans to cut the tariff on polyolefins from 30% to 20% on 1 January 1997. Producers are resigned to the fact that the cuts will proceed on schedule despite appeals to the government for a delay.
It is not clear what impact the tariff cuts will have on domestic prices as they coincide with the usual slow season in Thailand, one source said. The change may only have a psychological impact, he added.
Producers in Thailand said domestic prices are about 10-15% higher than prevailing international market prices. Nonetheless, they will still be more competitive than import prices after the tariff cuts. One producer expects to see no change in domestic prices in January. However, another fears that the massive oversupply of capacity in the country will put downward pressure on pricing.
Thai demand for PP in 1996 is estimated at 400-430 000 tonne. This is expected to rise by 10-12% in 1997. Thai production capacity will be about double this level once new plants are fully operational.
HMC Polymer plans to begin commissioning its second 160 000 tonne/year plant this week and expects commercial production by month-end. Thai Polypropylene will expand by 140 000 tonne/year, lifting its total capacity to 260 000 tonne/year. The startup may be as early as the end of Q1 1997, a source said.
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