Damaged transport links hamper earthquake relief

14 May 2008 06:43  [Source: ICIS news]

By Cheang Chee Yew

SINGAPORE (ICIS news)--Transport links damaged by the massive earthquake in Sichuan province in southwest China were hampering product deliveries and relief efforts in the region and restoring them have become priority, industry officials said on Wednesday.

More than 12,000 have died in Sichuan alone as a result of the earthquake that hit on Monday, with a few hundred more lives lost in five other provinces and in Chongqing, a provincial-level municipality next to Sichuan.

In a high profile response, state television showed Premier Wen Jiabao at the scene, comforting survivors and overseeing relief efforts.

PetroChina and Sinopec have each provided CNY 10m ($1.4m) in disaster relief. The former will also supply 100,000 tonnes of refined oil to the region, while the latter said it has offered personnel and special groups to provide support for the relief effort.

Highlighting land logistics issues, the Chinese military was planning to air drop aid to Wenchuan at the quake’s epicentre, state media reported.

Railways and roads linking Sichuan to northwest provinces such as Shaanxi, Gansu, Ningxia and Xinjiang, and southwest like Yunnan and Guizhou have collapsed, causing major transport problems, a local logistics company official said.

Rail transportation from Shanghai to Sichuan province had also been affected as the rail link passes through Xian in Shaanxi, he said, adding that telecommunication links with the affected areas were still down.

“We have not been able to contact our office in Chengdu since the disaster happened,” he said. Chengdu is about 100-km from Wenchuan.

Most of the plastics processors in Sichuan were located in Mianyang and Deyang county where buildings and roads were also damaged by the quake, although to a less extent than Wenchuan and Dujiangyan county, a Chongqing-based trader said.

“One of our customers in Dujiangyan, a high density polyethylene (HDPE) pipe manufacturer, had not been contactable since the disaster occurred,” he said in Mandarin.

With the movement of medicine and food assuming priority over other products, polyolefins supply would be short in the province in the near term, he added.

The dislocation of the transport network in Sichuan has created a degree of uncertainty in the chemical markets.

While not directly affected by the quake, acetic acid makers such as Yaraco have found it difficult to deliver their products as available transport links were being used to move food and relief supplies, domestic market officials said.

Eastern China-based acetic acid producers raised ex-tank prices by yuan (CNY) 50/tonne yesterday, and by another CNY100/tonne today to CNY5,550-5,650/tonne as buyers emerged to stock up on supply concerns ahead of an impending heavy plant turnaround season.

Polyvinyl chloride (PVC) traders, too, expect supplies to tighten in the Chinese domestic market and regional prices to rise.

The earthquake forced PVC makers in Sichuan, with a total production capacity of around 1m tonnes a year, to shut down their plants since Monday as a safety precaution. No damage to the plants was reported but it was not clear when any of the plants would resume operations.

Local sources noted that the plants were mostly likely able to resume operations only when the logistics bottlenecks are overcome.

The government had already suspended rail services between Sichuan and other provinces while any available transport services are likely to be diverted to the massive rescue effort currently underway.

Sichuan usually exports PVC to other provinces in southern China such as Guangzhou, and supplies in these parts are likely to tighten in the meantime. This could cause export prices in northeast Asia to rise in two ways, traders said.

The first would be an increase in Chinese demand for imports from other northeast Asian locations such as Taiwan and Japan, directly leading to an increase in import prices.

The second would be an increase in Chinese domestic prices, creating the leeway for other northeast Asian producers to raise their offers, thereby indirectly leading to an increase in import prices, they added.

Chinese-produced PVC is usually the most competitively-priced in the region, and is seen as the limiting factor on prices of PVC produced in other locations.

The earthquake also prompted China’s eight methyl ethyl ketone (MEK) makers to raise domestic prices by yuan (CNY) 300/tonne to CNY11,900/tonne ex-tank in eastern China and by the same amount to CNY12,300/tonne ex-tank in southern China, sellers and traders said.

The earthquake had not disrupted plant operations, but some local producers such as Lanzhou Petrochemical and Dushanzi were experiencing difficulty in transporting MEK cargoes as railway services have broken down.

An Asian titanium dioxide producer said that it was not clear if the Sichuan Lomon plant (80,000 tonnes/year) has been affected by the earthquake.

If it is, it would have a major effect on domestic TiO2 prices in China, as Sichuan Lomon is one of the biggest producers of TiO2 in China. Prices in the domestic and import market in China were already stable-to-firm on strong demand and could firm further if supply tightens.

Meanwhile, business is getting back to normal for two large methanol plants in neighbouring city of Chongqing, which were said to be operating normally after the earthquake in Sichuan.

The 450,000 tonne/year Chongqing Kingboard had shut on 12 May but restarted normal operations on 13 May, said a company source. The other 300,000 tonne/year Chuanwei methanol facility had also restarted operations although at low rates due to shortage of natural gas, said company sources.

Overall, the impact on methanol markets was minimal as a large part of China’s coal base methanol is produced in the northern Shanxi province.

Methanol prices in the coastal regions of Shanghai and Guangdong continued to rally upwards this week amid healthy downstream demand from gasoline blending and dimethyl ether (DME) sector and higher feedstock coal prices.

For another product, a polyethylene terephthalate (PET) bottle chip seller said that natural calamities such as last year’s floods in southern China have always triggered a slight rise of CNY100-200/tonne DEL for PET bottle chips on the back of stronger demand for bottled water.

Ethylene buyers in China, however, said the earthquake had no impact on crackers in the country as the product is usually not transported by rail.

($1 = CNY6.99)

Ng Hun Wei, Chow Bee Lin, Prema Viswanathan, Helen Lee, Peh Soo Hwee, Anu Agarwal and Hong Chou Hui contributed to this article

By: Cheang Chee Yew
+65 6780 4359

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