FocusSouth Korea PP makers may cut plant runs on margin squeeze

24 October 2012 04:31  [Source: ICIS news]

By Chow Bee Lin

SINGAPORE (ICIS)--South Korea’s polypropylene (PP) producers are inclined to cut output in November if their margins get squeezed further, industry sources said on Wednesday.

Integrated PP margins in northeast Asia were estimated at minus $19/tonne (€15/tonne) last week, moving deeper into negative territory from minus $4/tonne in the previous week, because of lower PP prices, according to ICIS data.

Prices of the benchmark PP flat yarn fell by $20-30/tonne week on week to $1,390-1,430/tonne CFR (cost and freight) China on 19 October, ICIS data showed.

Most of the PP plants in South Korea are currently operating at full or close to full capacity, industry sources said.

“We will consider reducing our PP plant operating rates if the situation worsens,” said a source at SK Energy.

Honam Petrochemical will consider whether to reduce its PP output if the spread between propylene and PP spot prices narrows further, a company source said.

“We are still running our PP plants at full capacity now. We will consider whether to cut operating rates in November or not, depending on the market situation,” he said.

PP markets in China and southeast Asia suddenly turned very bearish last week, a second Honam source said.

Weak downstream demand and uncertainty in the global economy had been weighing heavily on buyer sentiment and limiting purchases of the polymer in the spot market, resulting in thinning margins for PP makers, industry sources said.

“It is really tough for us now,” a source at Korea Petrochemical Industry Co (KPIC) said.

As of yet, KPIC has no definite plans to cut PP production, the source said.

South Korea is expected to produce 2% more PP this year at 3.8m tonnes, and export 2.3m tonnes of the resin, representing a 2.3% increase from last year, according to the Korea Petrochemical Industry Association (KPIA).

South Korea was the top exporter of homopolymer PP to China in August this year, having delivered 95,000 tonnes of the resin to its northeast Asian neighbour.

China is South Korea’s largest PP market.

($1 = €0.77)

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Chow Bee Lin
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