FocusAsia polyacetal supply glut to stay for two yrs on tepid demand

24 May 2012 05:24  [Source: ICIS news]

By Heng Hui

POM’s main end users are in the automobile and electrical sectors. This includes gear drives, pumps, conveyor belts, hand tools, toys, clock and watch parts, and medical devices.SINGAPORE (ICIS)--Asia is in oversupply of polyacetal (POM) – a condition that will likely persist for up to two years given softening demand in major downstream automobile and electrical sectors, amid the global economic slowdown, industry sources said on Thursday.

POM’s downstream industries rely solely on consumer spending, but consumer confidence is currently at lows because of prevailing economic uncertainties. The eurozone is still neck-deep in a debt crisis, while the US economy remains weak, dragging down the Asian economies because of trade ties.

Asia’s demand for POM is estimated at slightly less than 800,000 tonnes/year, and is expected to grow at an annual rate of about 4-5%, in line with the average economic growth of the region.

POM is considered a low-cost plastic that can replace metals and other engineering resins in automobile manufacturing such as nylon 6,6, polyethylene terephthalate (PET), polycarbonate (PC) polybutylene terephthalate (PBT), and polyvinyl chloride (PVC), in selected applications. It is used in gear drives, pumps, conveyor belts, hand tools, toys, clock and watch parts, and medical devices.

Global POM capacity is currently estimated at above 1.1m tonnes/year, with Asia accounting for more than 70% of the total. The region currently has about 810,000 tonnes of POM capacity, according to industry estimates.

An upbeat outlook on demand growth for engineering plastics, particularly in China – the world’s leading automobile market – had prompted the recent strong investments in POM capacity.

Over the next two years, some 280,000 tonnes of new POM capacity are confirmed to come on stream from major players in Asia, boosting the region’s capacity by about 35%.

In 2013, a new 60,000 tonne/year facility will be started up by China’s Kaifeng Longyu Chemical in Henan province, bringing the company’s POM capacity to 100,000 tonnes/year.

Thai Polyacetal’s new 45,000 tonne/year facility at Map Ta Phut in Rayong province is also due to come on stream in the second quarter of next year. The company has an existing 55,000 tonne/year POM facility at the site.

In Saudi Arabia, Ibn Sina intends to complete construction of its 50,000 tonne/year POM unit in Al-Jubail next year, a company source said.

Malaysia’s Polyplastics, meanwhile is the biggest polyacetal producer in the world with a total capacity of 213,000 tonnes/year.

It is expected to add 90,000 tonnes/year of capacity in early 2014 in Kuantan, Malaysia, where it currently has a 33,000 tonne/year facility. The company also has POM facilities located at Fuji in Japan, Kaohsiung in Taiwan and Nantong in China.

Korea Engineering Plastics is also adding a 35,000 tonne/year facility in Ulsan that should boost its POM capacity to 100,000 tonne/year by the first quarter of 2014.

Smaller capacity increases are also being planned in China but details are still sketchy, market sources said.

With China’s domestic POM capacity also expected to increase, trade flows could change since the country is the biggest importer of POM in Asia, market sources said.

In 2011, China imported around 211,013 tonnes of POM, inclusive of basic and compounded grades, according to official data.

Market players also warned that if domestic POM production grows too big in China, the country might impose antidumping duties on imports of the product.

Spot polyacetal prices in Asia were assessed at $1,580-1,700/tonne (€1,264-1,360/tonne) FOB (free on board) NE (northeast) Asia, according to ICIS’ maiden report on the market launched on 22 May.

Prices look set to fall given the current supply glut in Asia, as demand from the key China market is weakening, market sources said. The Chinese economy has been slowing down, as exports – its main engine of growth – are being severely hit by the financial and economic woes in the West.

Scheduled POM plant shutdowns are due in the next few months, but these are unlikely to tighten supply and lift prices as they have been anticipated by the market, market sources said.

PTM Engineering Plastics' 60,000 tonne/year POM resin facility in Nantong, Jiangsu Province in China will shut for about a month in August, for maintenance.

Polyplastics will also shut its 100,000 tonne/year POM facility at Fuji in Japan for a month in October for a three-week long turnaround, while Taiwan’s Formosa Plastics Corp (FPC) is planning to shut its 25,000 tonne/year POM unit at Chiayi city in Hsin Kang in December for two weeks.

($1 = 0.80)

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

By: Heng Hui
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