Polycarbonate demand will match capacity expansions

17 October 2011 00:00  [Source: ICB]

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Producers and industry observers see demand growth matching global polycarbonate expansions

Although global demand is weak for polycarbonate (PC), and has resulted in prices being driven down in most regions, growth in Asia is projected to be strong, and several companies are increasing PC capacity.

In the future, more innovation in PC applications "will come from Asia-Pacific," said Michael Koenig, head of the polycarbonates business unit and a member of the executive committee of Germany-based Bayer Material-Science (BMS). "This is why we are investing heavily there - not just in production assets, but into innovation and an expansion of our research center."

BMS will be investing €1bn ($1.3bn) to expand its methyl ­di-p-phenylene isocyanate (MDI), PC and coatings production in Caojing, Shanghai, China.

For PC, BMS plans to double its Caojing capacity to 400,000 tonnes/year by 2013, with a start-up in 2014. The company will then debottleneck its PC production by 100,000 tonnes/year, to 500,000 tonnes/year by 2016.

The project is part of an effort by parent group Bayer to increase its sales in China to €5bn by 2015. BMS is expected to contribute at least one-half of that amount. ­According to Koenig, BMS has about 60% of the PC market in Asia, with about one-half of that in China. "We predict that until 2015, we will have [roughly] two-thirds of the PC demand in Asia. For that reason, we have moved our PC headquarters to China, in Shanghai" in July. Moving PC's headquarters to Shanghai "changes our focus," he added.

While BMS sees a slowdown in the general global economy, growth projections for the region are unchanged. Overall, global growth "is seen at 6-7%/year" going forward, and "more than 10%/year in China," said Koenig.

"The use of PC in China is both penetrating into new markets and being used more in its already established [markets]," he noted. In China, electronics are "developing well," but "automotive is a fantastic success story - especially in more high-end cars," said Koenig.

Roughly 80% of China's PC ­demand comes from the coastal regions, and the Chinese government is encouraging economic development to move westward. "This is why we are investing in Caojing," said Koenig.

Electronics will continue to dominate the PC market, followed by sheet and film, non-glazing ­automotive applications, housewares and optical media - "which has obviously already peaked and is declining," said Bruce Petersen, chief procurement consultant for the US-based consultancy Mathelin Bay Associates. Overall PC ­demand this year is estimated to be 3.6m tonnes, noted Petersen.

 Asia PC prices fall  

Projecting a growth rate greater than 10% for PC in China for the next 10 years, Saudi Arabia-based petrochemical giant SABIC has been very busy on the PC front. The company is planning a $1bn advanced PC technology plant in Tianjin, China.

Expected on stream by 2018, the plant will have annual ­capacity of 260,000/tonnes.

The Tianjin facility will be a 50:50 joint venture between SABIC and China's Sinopec.

Meanwhile, SABIC's 260,000 tonne/year PC unit at Al Jubail came on stream in the middle of March. One-half of the plant's output of PC is expected to be exported to the China market in the third quarter, market sources said in June. At the beginning of October, a 260,000 tonne/year PC plant began its start-up in Jubail Industrial City, Saudi Arabia.

Run by Saudi Kayan, a joint venture between SABIC and Saudi Arabia-based AlKayan Petrochemical, the facility is planned to be fully operational by next year.Most recently, in mid-October, China's Sinopec-Mitsubishi ­Polycarbonate (SMP) said it would start up its 60,000 tonne/year PC plant in ­Beijing at the end of ­November. SMP is a joint venture between Sinopec and Japan-­based Mitsubishi Chemical and Mitsubishi Engineering Plastics.

All the extra capacity will not be used up overnight, notes Petersen: "As with all markets, there will be short-term fluctuations in supply/demand," he said. But "given the continued expected ­average annual growth of around 200,000 tonnes/year, the [various facilities] that are planned or already in start-up throughout the Middle East and Asia should find ample demand for their output."

Koenig adds: "In the end, what the industry really needs to do is ensure that there is enough material available, and the current announcements are accomplishing just that."

Higher-than-average growth is projected by BMS in the midterm for new applications, such as renewable energy - particularly solar modules - and light emitting diodes (LED). "LED lenses can be molded cheaper than before," and with their energy-saving potential, governments have been "pushing LEDs," said Koenig.

LEDs will be a "very significant market" for PC going forward.

However, optical data storage, like CDs and DVDs, "is a declining market," said Koenig. China ­consumed around 1.1m tonnes of PC in 2010. Of this, 969,000 tonnes came from imported cargoes, according to Chemease, an ICIS ­service in China.

An additional 197,000 tonnes of PC from SMP and SABIC are expected as a result of their new capacities. This combined output will more than meet China's increased demand for PC, which will be around 90,000 tonnes this year, a market participant in east China said.

As a result, the market will have a surplus of around 107,000 tonnes of PC, the market participant added.

"This will [cause] prices [to begin falling] in the second half of the year, especially in the fourth quarter," he added.

In the last month, global ­economic uncertainty and waning demand "have led to a significant decline in prices for major building block chemicals, including benzene and its derivatives, which has led to a softening of pricing for several polymers, including PC," said Petersen.

As of the start of October, PC prices in the US and Europe were falling by 5 cents/lb and €0.05-0.20/kg, respectively, while Asia prices were assessed as stable. But all the regions reported weak demand, ample supply and falling feedstock costs.

Buyers in the US are reported as being extremely cautious, while Asian trading is considered subdued. In Europe, one buyer said that there is a lot of price competition and it has received considerable reductions without disclosing the amount.

Another buyer said it had been offered reductions of €0.10-0.20/kg on molding grade PC because the market is oversupplied and the sellers keen to offload.

With additional reporting by Anna Jagger in London, Wesley Busch in Houston and Leon Guo in Shanghai

By: Ivan Lerner
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