02 July 2008 08:08 [Source: ICIS news]
By Peh Soo Hwee
SINGAPORE (ICIS news)--Sinopec’s decision to continue ethylene production cuts into July are unlikely to lead to an increase in Chinese import demand, as the cutbacks are mainly targeted at reducing polyolefins output, traders said on Thursday.
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It had reduced ethylene production by 65,000 tonnes or 11% of the company’s monthly production capacity, in June.
As of end-2007, Sinopec had 10 ethylene plants - including two joint ventures - with a total capacity of 6.145m tonnes/year. Actual production was higher at 6.534m tonnes/year, the firm said in a statement on its website.
“We expect June and July (ethylene) imports to be fairly stable compared with May volumes,” said a Shanghai-based trader in Mandarin. “The cracker cuts are likely to result in a corresponding cut in PE (polyethylene) production only.”
Prices of imported polyolefins prices bottomed out late last week as a direct result of Sinopec’s decision to cut ethylene and polyolefins production next month, local traders said.
“Domestic prices have stopped falling as local distributors are not so eager to sell anymore,” another Shanghai-based trader said, noting that local distributors had rushed to sell products after PetroChina slashed its domestic prices early last week.
Traders also raised the offers of imported material for prompt lifting at the bonded warehouse due to the improved sentiment.
Offers of imported film grade high density polyethylene (HDPE) at $1,780/tonne CFR (cost and freight) China last week were not available this week, with the offers raised to $1,810/tonne CFR China, one local trader said.
End-users in other derivative markets such as polyvinyl chloride (PVC) and styrene were unlikely to be affected by the cuts in ethylene output as they were not reliant on Sinopec for their raw material needs, producers and traders said.
With the exception of Shanghai Chlor-Alkali, most ethylene-based PVC producers in
“Similar measures were imposed in June, but we do not see any impact at all on PVC export prices into
Production at Sinopec’s other ethylene derivative units such as monoethylene glycol (MEG) also remained unaffected.
“There are no plans to reduce MEG production yet as the Olympic Games are just around the corner. The MEG plant is still running at 100%,” said a Sinopec source.
Even with the downstream polyester industry cutting back production on the back of the lull season and poor margins, Sinopec would still be running its MEG line at full capacity and “would consider cutting back rates only if required”, he added.
Sinopec’s MEG plant in
Downstream polyester makers remained unruffled by the prospect of lower MEG availability.
“We don’t even need so much MEG as our sales have been poor due to the lull season. We’re currently operating at about 75% capacity but we will be cutting back soon to preserve our margins,” said a source from a polyester fibre and yarn (POY) maker located in
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