FocusBeijing Olympics may close some petchems

02 May 2008 05:27  [Source: ICIS news]

By Hong Chou Hui 

SINGAPORE (ICIS news)--Beijing is regulating the production and sale of more than 257 chemicals around the city -  a move which may result in the closure of a number of petrochemical makers and traders, sellers and buyers said on Friday.

Beijing’s Municipal Public Security Bureau imposed the blanket ruling from 1 May through 17 October, dovetailing environmental safeguards issued in regions falling within a 500km radius of China’s capital.

The combined moves are aimed to ensure that pollution would be curbed ahead of the country’s showpiece Olympic Games in August.

The effects of the new policy were already felt across the board by the petrochemicals sector located within and outside of Beijing with products such as propylene, ethylene and diethylene glycol (DEG) among the 257 products listed.

“The unsaturated polyester resin (UPR) makers around Beijing and maybe even as far as Wuhan could find themselves out of business for good thanks to the Olympics,” a DEG seller based in Shanghai, eastern China, said in Mandarin.

“Missing out three months of sales just for cleaner air is good for the athletes but it’s as good as a coup de grace for the UPR factories,” he added.

DEG is the feedstock for UPR factories which produce household goods.

Prices for DEG softened by $15-20/tonne (€9.75-13.00/tonne) to $1,050-1,060/tonne cost and freight (CFR) China for the week to 25 April from $1,065-1,080/tonne the previous week, based on global chemical markets intelligence service ICIS pricing.

Traders said production of solvents such as methyl ethyl ketone (MEK) which is used to make industrial paints coatings, might also be affected in the run up to the Olympics.

“Chemical plants near Beijing especially those in Shandong province may have to stop operating for a certain period,” a solvents trader based in Japan said.

There are eight MEK producers in China, most of who are based in the northern part of the country.

The Chinese caustic soda market is also likely to be affected by the environmental regulations although traders and producers said the extent of the impact remained unclear at this stage.

As production of caustic soda in Beijing had already ceased since late last year, the newly imposed production ban would not have a significant impact, traders said.

Most major caustic soda makers within the stipulated 500km radius had also begun retrofitting their plants so that their emission levels would fall within the acceptable levels, the sources added.

They acknowledged, however, that the few small plants unable to comply with the environmental standards would still have to shut down.

Caustic soda producers also expected to encounter logistical difficulties in the next few months but the impact was could not be gauged.

Transportation of caustic soda was likely to be restricted around Beijing and market players said they were already looking into alternative routes.

“It’s still unclear as to exactly which transport modes and routes would be affected but liquid caustic soda is hard to store compared to other solid petrochemical products and so suppliers have to start making plans,” a trader said.

Production aside, trading activities for petrochemicals in and around Beijing were also impacted by the blanket ban.

The paperwork required for the sale and transport of chemicals was considered too much of a hassle as sellers and buyers alike had to fill in forms giving a myriad of detailed information such as the final destination and intended use of the chemicals transacted, said market sources.

With the imminent implementation of the restrictions, a number of small styrene monomer (SM) traders had liquidated their stocks in anticipation of slower trades in the months ahead, said a trader in eastern China in Mandarin.

The recently announced regulations on 257 chemicals had further curbed trading appetite for polystyrene (PS) and acrylonitrile-butadiene-styrene (ABS), added a resin trader based in Shanghai.

The market may have to wait until July before a significant improvement in demand emerges., traders said, adding that the combined effect would be the elimination of small scale petrochemicals traders as the new regulations had effectively curtailed their turnaround time.

($1 = €0.65)

Clive Ong, Peh Soo Hwee, Ng Hun Wei, Sikee Shi and Vicky Long contributed to this article.

By: Hong Chou Hui
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