Asia chem firms to benefit post-2011 on no fresh Mideast supply

15 September 2010 06:54  [Source: ICIS news]

HSBC says the next petchem industry upcycle will happen post-2011.SINGAPORE (ICIS)--Asian chemical firms can look to a brighter future when the industry recovers from a trough after 2011, with no fresh supply of low-cost products expected to come from the Middle East in the next five years, according to HSBC Global Research.

“As the era of low-cost Middle East capacity additions draw to a close, Asian chemical companies are poised to capitalise on the next upturn in the chemical cycle,” the research firm said in a report released late on Tuesday.

The Middle East would bring on 8m tonnes of ethylene capacity between this year and next year but capacity growth in the region beyond 2011 “looks bleak”, it said.

No new crackers have been planned in Saudi Arabia between 2012 and 2015, while the Dow-Aramco project was only tentatively set for 2016, it noted.

“All in all, the Middle East, after accounting for over 40% of global supply additions over the 2008-11 period, has very little to contribute in terms of new supply after 2011,” the report added.

Asian industry players would also benefit from their proximity to China, which is a major market for chemicals and has been increasingly procuring supply within the region, HSBC said.

Assuming that China’s demand for synthetic resin would grow at an annual rate of 9.5%, its net imports would increase by 6.3m tonnes/year over 2012-2014.

The country was expected to absorb 80-85% of the capacity additions in Asia and the Middle East between 2011-2014, taking into account some delays in some projects, HSBC said.

Thai major PTT Chemical has a cost advantage over peers since it is the only one in Asia with a sizeable gas-based cracker, it said.

Gas prices in Thailand are substantially cheaper and less volatile than naphtha and this should boost PTT’s margins more significantly as compared to other producers that are using naphtha as feedstock, the HSBC report said.

“We also expect the company to record a significant volume increase of 30% in 2011 as a result of the expected resolution of the Mab Ta Phut issue, which has put the company’s downstream capacity addition on hold in 2010,” the report added.

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Nurluqman Suratman

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