OUTLOOK ‘13: Oversupply to plague Asia BPA markets, PC lacklustre

28 December 2012 02:14  [Source: ICIS news]

By Christina Siantar

SINGAPORE (ICIS)--Asia’s bisphenol-A (BPA) supply will increase by 585,000 tonnes in 2013 from four projects due to come on stream in South Korea and China, aggravating oversupply that depressed BPA prices in the fourth quarter of 2012, market sources said.

Demand from downstream polycarbonate (PC) and epoxy resins sectors is expected to remain lacklustre amid the global economic slowdown, they said.

Spot BPA prices had been volatile throughout 2012, with the mid-point fluctuating at the range of $1,510-1,780/tonne (€1,133-1,335/tonne) CFR (cost & freight) China, according to ICIS data.

In the key China market, BPA prices remained largely flat in the second half of last year because of poor derivatives demand, even though upstream benzene prices spiked by as much as 30%.

Most regional BPA producers purchase benzene as feedstock to produce phenol/acetone, with the phenol/acetone output going into the production of BPA.

Rising benzene prices have squeezed BPA producers’ margins, forcing some northeast Asian players to either prolong the turnaround period at their plants or cut production.

Market players are worried that the 585,000 tonnes/year BPA capacity increase in Asia may not be met by a corresponding increase in demand.

In South Korea, LG Chem plans to start up its new 150,000 tonnes/year BPA plant at Daesan in mid-January 2013, while in China, Chang Chun Plastic is likely to commence production at its new 135,000 tonnes/year line at Chang Su in the first quarter of 2013, company sources said.

Some Chinese traders are even considering exiting the BPA market if profitability is eroded.

“Spot cargoes from the market should be easily available next year. Everybody knows China market will be in surplus,” said a China-based trader.

Another China-based trader is expecting “limited demand recovery in first half of 2013”.

Given a bleak outlook in the BPA market and an expected oversupply, two producers decided to postpone the start-up of their facilities to the second half of 2013.

Kumho P&B Chemicals’ new 150,000 tonnes/year line at Yeosu in South Korea will be started up in July, instead of the original plan to have it up and running in February, a company source said.

Nan Ya Plastics, meanwhile, also pushed back the start-up of its new 150,000 tonnes/year BPA unit at Ningbo, China to end-December from end-June, a company source said.

“Demand is not good,” said a BPA seller.

Chinese importers may decide to just procure BPA from the domestic market given the expected growth in supply.

“I might reduce buying from [the] import market and purchase more domestic materials next year,” said a major Chinese buyer.

Meanwhile, the supply of PC – a key downstream of BPA – is also likely to remain long in 2013 given the poor global economic situation that slows down trades of finished products, industry sources said.

“I don’t think end-user demand will be good in the first half of 2013. My customers’ sales forecast is pretty low for the next few months,” a Hong Kong based trader said.

In the optical-grade PC sector, demand is expected to decline further in 2013 as finished products – CDs and DVDs – are losing out on consumers’ favour with the evolution of new technology.

($1 = €0.75)

By: Christina Siantar
+65 6780 4327

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