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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Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections


By: John Richardson
+65 6780 4359



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