FOCUS: Wuxi pollution hits China chem demand

19 June 2007 06:56  [Source: ICIS news]

By Clive Ong

SINGAPORE (ICIS news)--China’s orders to shut polluting chemical plants around Taihu Lake in eastern China has hit petrochemical demand especially for unsaturated polyester resin feedstocks, market sources said on Tuesday.

The temporary closure of UPR (unsaturated polyester resin) factories around the region has reduced demand for industrial grade propylene glycol (PGI), styrene monomer (SM) and maleic anhydride (MA), they added.

"As many UPR factories are heavily concentrated in Changzhou, Wuxi and Suzhou, the work restraint order has noticeably undermined PGI sales in the country. There’s definitely a downward pressure on prices," a seller said in Mandarin.

In late May, an algae bloom choked Taihu, the country’s third largest freshwater lake, and left over 2m Wuxi residents without any tap water. Five officials in neighbouring Yixing city was punished in the scandal and Premier Wen Jiabao has ordered an immediate clean-up.

To tackle the pollution, the local government has vouched to shut 772 small chemical plants by the end of 2008 and ordered no new plants can be set up within 1 km to the lake.

Chemical plants located within 5km from the lake will need to move to designated parks where they will have to pay for waste treatment.

The impact of these shutdowns has been more acute among smaller producers rather than large firms, the sources said.

"While there hasn’t been an obvious price change because of the shutdowns, the market has certainly taken a hit, with smaller PGI makers more badly affected," a major PGI producer said in Mandarin.

PGI prices were at yuan (CNY) 11,300-12,000/tonne ($1,401-1,573) ex-tank on Friday, and could be stable-to-soft this week, according to global chemical market intelligence service ICIS pricing.

Prices for styrene monomer (SM), another UPR feedstock, declined to yuan (CNY) 12,250-12,300/tonne ($1,606-1,612/tonne) ex-tank last week from CNY12,750/tonne ex-tank a week earlier, a trader in Shanghai said.

With demand for other styrenic plastics in the doldrums, reduced UPR consumption weighed heavily on prices, he added.

Demand for MA has also been hit after UPR producers were asked to shut, traders said, adding that MA constituted 15% of UPR.

Poor downstream demand, coupled with a dip in feedstock coal-based benzene prices, had brought down MA prices in eastern China. Prices fell at least CNY200/tonne to CNY9,200-9,400/tonne ex-works last week from a week ago.

Other larger facilities were less affected by the recent clean-up measures. Operations at key liquid epoxy resin plants in Wuxi and Yixing have so far been unaffected by the recent government checks.

"So far big enterprises like us have not been affected yet although the government is coming down hard on small chemical plants," an official from Blue Star New Chemical Materials, an epoxy resins producer in the region, said in Mandarin.

Wan Hsin Hun, Kew Jia Hui, Peh Soo Hwee and Ailsa Gao contributed to this article.

By: Clive Ong
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