04 June 2013 16:45 [Source: ICIS news]
LONDON (ICIS)--New polyethylene (PE) and polypropylene (PP) capacities coming on line in Asia and the Middle East could result in global supply outweighing demand and, in time, exert downward pressure on African PE and PP prices, participants said this week.
A distributor said on Tuesday: “New capacities are coming up in PP and PE which are creating an impact on prices. Last week my colleagues visited Chinaplas in China. All the producers were mentioning about their new capacities. And [they’re] ready to give exclusivity on fixed volumes monthly. So surely there is pressure on polymer producers to place volumes.”
The most significant of these new capacities is that of ExxonMobil, which has begun ethylene production at its new 1m tonne/year cracker at Singapore’s Jurong Island. The project includes two 650,000 tonne/year PE units and a 500,000 tonne/year PP plant.
China’s Wuhan Petrochemical has two new PE plants in Hubei province. Trial runs are expected to be conducted in June. The high density polyethylene (HDPE) and linear low density polyethylene (LLDPE) plants will have a capacity of 300,000 tonnes/year each.
The company also has a new 400,000 tonne/year PP plant in Hubei province. Trial runs are expected to be conducted in June.
Also in China, Sichuan Petrochemical plans to start its new 450,000 tonne/year PP plant in July.
“Once the new plants are up and running, global supply will be greater than demand,” a second distributor said.
However, one Middle East producer feels that any impact will be short-lived: “There’s new capacity from Exxon Singapore, but I don't think there will be downward pressure on prices. The Chinese economy is slowing down, but it is still growing. Polyolefins consumption is expected to grow by 10% next year.”
“Initially yes [there may be some impact on prices]; that always happens when new capacities come on line,” the source continued. “There’s pushing and tugging; new players are trying to establish themselves.”
However, the source feels there are other factors that would more significantly influence African PE and PP pricing.
“The important factors to watch for pricing would be the global economic situation. People are discussing the shale gas situation; the European and Latin America markets are eagerly looking forward. It could be a game changer. We are concerned about finances next year; we pay higher duties in Europe next year. We’re concerned about netbacks rather than pricing. It’s more than just demand and supply. Oil [prices], naphtha [prices], economies, exchange rates are all to be considered.”
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections