Polymers: Asia polycarbonate prices soften on weak demand

30 May 2011 00:00  [Source: ICB]

Demand for PC will be fuelled by Asian auto growth

Rex Features

Additional capacity and uncertainty on China growth clouds outlook for Asian PC market

Polycarbonate (PC) prices in Asia are soft to stable on ample supply and lukewarm demand.

Optical-grade PC prices were unchanged, with the bulk of deals and discussions for May heard at $3,050/tonne (€2,165/tonne) CIF (cost, insurance & freight) Hong Kong for large-volume accounts, and at $3,150/tonne CIF Hong Kong for smaller parcels for the week ended May 18, as assessed by ICIS.

In comparison, prices for general purpose (GP) molding-grade PC fell by $50/tonne at the low end of the range, reflecting deals and discussions regarding May shipment. Some suppliers cut their prices in view of weak demand and abundant supply.

Lower-priced cargoes were available at the high $3,100s/tonne CIF Hong Kong/China Main Port (CMP), but the bulk of deals and discussions were heard at $3,200-3,300/tonne CIF Hong Kong/CMP.

Spot prices for GP extrusion-grade PC fell at the high end of the range, also by $50/tonne, based on weak buying sentiment. Some sellers kept their offers at above $3,100/tonne CIF Taiwan in light of their poor margins, but the bulk of deals were heard at below $3,000/tonne CIF Taiwan.

Despite soft prices, US-based producer SABIC Innovative Plastics (IP) and China's Sinopec are moving ahead with a new 260,000 tonne/year PC plant in Tianjin in China, which is expected to come onstream in 2015.

More than 50% of the output from this facility is targeted at the Chinese market. SABIC IP is a unit of Saudi chemical giant SABIC. "The addition of this new plant, in addition to the other plants that will be coming on line between now and 2015, will certainly have an effect on overall world supply," said Bruce Petersen, president of US-based Polymer Consulting Services (PCS).

The Saudi Kayan plant at Al-Jubail, Saudi Arabia, with a capacity of 260,000 tonnes/year of PC, only started production trials in the middle of March, he noted.

"It is likely that the world trade balance will also be affected, but it is perhaps a little too soon to see how this will shake out over the long haul due to other issues related to feedstock supply," said Petersen.

The PC market is expected to be positively affected by growth in the automotive, construction and home appliance markets - all key markets for PC demand in China. These markets have rebounded and are all expected to have double-digit growth in 2011 and beyond, according to PCS.

In addition to the 260,000 tonne/year expansion, SABIC IP plans to build a second PC plant in China by 2018 to cater for the country's rapidly growing demand. This plant is part of the company's second phase of PC investments in China.

Spot prices for Asian bisphenol A (BPA), a feedstock for PC, edged down by $10/tonne to $2,490-2,520/tonne CFR (cost & freight) Northeast Asia (NE Asia) on May 13, based on volatile crude futures and weak domestic prices in China.

"Until some other technology is invented, BPA will remain a driving factor in the PC market," said Petersen. "However, as with many things in the petrochemical industry, it is more complicated than that."

BPA is produced from phenol, which itself is produced from cumene. Cumene is derived from benzene and refinery-grade propylene (RGP). Phenol supply in recent months has been short across North America, Europe and Asia, which has resulted in ­constraints on BPA and, therefore, PC production.

The upstream feedstock supply issues for PC have been the loss of 250,000 tonnes of phenol capacity in Kashima, Japan, as a result of the earthquake and tsunami; problems at catalytic crackers in the US, some of which directly supply cumene plants and other producers of RGP, adding to the overall supply woes in the propylene (C3) market; and a shortfall in Europe of cumene supply, which is limiting phenol production, according to PCS.

"These feedstock issues will be very critical in the future, and the earthquake/tsunami in Japan will very likely have a long-term effect on the global balance for cumene, phenol, acetone, bisphenol A and polycarbonate," Petersen said.

Meanwhile, other production issues have also made PC supply in Asia uncertain.

For example, Taiwan's Formosa Idemitsu Petrochemical has shut all three of its PC lines in Mailiao, Taiwan, after a fire at a neighboring complex caused a power outage on May 12.

Formosa Idemitsu's No. 1 and No. 2 lines can each produce 60,000 tonnes/year of PC, while its No. 3 line has a capacity of 75,000 tonnes/year of PC production, as assessed by ICIS.

Formosa Idemitsu is a joint venture between Taiwan's Formosa Chemicals & Fibre Corp. and Japan's Idemitsu Kosan.

"There is certainly significant ­potential that the US will see a reduction in its net polycarbonate exports, which ran close to 50% of capacity in 2010," ­Petersen added.

Other countries that also ­export significant quantities of PC to China - South Korea, Taiwan, Thailand, Singapore and Japan - may also ultimately see reduced demand.

However, there is growing ­uncertainty about continued growth in China.

"The Chinese government has put measures in place to control demand, ranging from the amount of electricity that is available to how many homes families can buy," Petersen said. "Changes in these restraints can and will have a profound influence on demand."

The global automotive industry has rebounded and is gaining steam, Petersen pointed out.

US business consultancy IHS forecasts global growth in light vehicle sales to be 35% from 2010 to 2016.

China is forecast to be the ­global leader for growth in demand in light vehicle sales and has already surpassed the US in the total units sold. "So yes, this is very much an important factor in the PC and other plastics ­markets," Petersen said.

Additional reporting by Liu Xin in Singapore

By: Feliza Mirasol
+1 713 525 2653

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