FocusAsian polyolefins face H2 2010 crunch on new capacities

16 December 2009 10:30  [Source: ICIS news]

By John Richardson

SINGAPORE (ICIS news)--The bottom of the global polyolefins trough did not arrive in 2009 because of delayed start-ups and China’s huge government economic stimulus, industry sources said on Wednesday.

But the next year could be the year when the maximum impact of new capacities would be felt, they warned.

“Towards the end of every few months during 2009, we saw buyers withdraw in big numbers from markets expecting new volumes that didn’t arrive,” said a source with an Asian polyolefin producer.

A classic example was the steep fall in prices – as much as $200/tonne(€138/tonne) in the space of just a few days – ahead of China’s long October holidays, he added.

But the post-holiday supply surge did not happen due to difficulties in stabilising production at new plants in China and the Middle East, he said.

The current wave of start-ups involve the biggest complexes ever commissioned in the history of the industry, added several sources. 

The long-running shortage of senior engineers capable of bringing these new complexes smoothly on-stream seems to be one of the factors behind the delays, they said.

A wide-spread hope is that there will be more delays in 2010, creating further breathing space.

New capacities could hit the market at a time of lower growth in China as a result of the government cutting back on fiscal stimulus. (see tables below)

Beijing faces the tricky task of maintaining the construction boom while preventing real-estate costs from rising so much that inflation gets out of hand and properties become unaffordable for average earners, said the online Beijing-based economics research publication, the China Economic Quarterly (CEQ).

A healthy construction sector is vital to the health of the overall economy, the publication added. In 2008 for example, 34% of local government revenue came from land sales and land taxes, it calculated.

Inflationary pressures would build to the point where some fiscal tightening will be needed by mid-2010 at the same time as a Yuan revaluation, predicted the CEQ.

These are the new capacities planned for China in 2010, according to Shanghai-based commodity information service CBI:

 

Grades	Company	Capacity (kt)	Startup
HDPE	Tianjin PC	300	Q1,2010
	Zhenhai Ethylene	200	Q1,2010
	Baotou Shenhua	200	Q3,2010
LLDPE	Tianjin PC	300	Q1,2010
	Zhenhai Ethylene	250	Q1,2010
PP	Tianjin PC	450	Q1,2010
	Zhenhai Ethylene	300	Q1,2010
	Dagang PC	100	Q1,2010
	Ningxia Shenhua	500	Mid-2010
	Baotou Shenhua	300	Q3,2010
	Guangxi PC	200	Q3,2011
	Luoyang PC	140	Q3,2012

 

The rest of Asia and the Middle East will also contribute to potentially big surpluses:

Company	Location	Product	kt/yr	Start-up
Sharq	Saudi Arabia	PE	800	Q1 2010
Qatofin/Q-Chem	Qatar	PE	800	Q1 2010
Borouge	Abu Dhabi	PE PP	540 800	Mid-2010
PTT PE Bangkok PE	Thailand	LDPE LLDPE HDPE	300 400 250	2010 Trial prodn started Trial prodn started
SCG Dow Thai Polypropylene	Thailand	HDPE PP	300 400	Q2 2010 Q3 2010
Indian Oil Corp	India	Hd/lldPE HDPE PP	300 300 600	H1 2010

Source of 2nd table: ICIS training

($1 = €0.69)

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By: John Richardson
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