By John Richardson
AN enormous amount of new linear low-density polyethylene (LLDPE) output should, in theory, be destabilising Asian markets right now due to recent start-ups and increased production at plants brought on-stream last year and in early 2010.
But the big question is to what extent global production is being constrained by a shortage of co-monomer butene-1.
In the Indian domestic market plant shutdowns have created a tight market, although industry sources say that butene-1 isn't tight locally.
The co-monomer is, however, tight in Saudi Arabia, Qatar and the West, according to other sources.
But still, describing LLDPE itself as tight might be going a little far given all the new capacity. It's probably fair to say, though, that it's tighter than high-density PE (HDPE).
So here's a blow-by-blow account of recent new LLDPE capacity and what the blog has been able to gather about how it's operating:
The Fujian Refining & Petrochemicals 650,000 tonne/year plant in China, which first came on-stream at end-August last year, is running at close to 100%, a source familiar with the plant's operations told the blog.
The 450,000 tonne/year Qatofin plant in Qatar officially came on-stream in November last year.
Not much material from the facility had been seen in the market up until recently, as it will have been running either on imported ethylene or C2s borrowed from existing crackers in Qatar.
Now, however, the new 1.3m tonne/year Ras Lafan cracker - Qatofin's feedstock supplier - has started up.
The Qatofin plant is running at 50-60%, an industry source said today.
SABIC's YanSab complex in Saudi Arabia was hit by a power-plant outage earlier this year, but sources now indicate that its 500,000 tonne/year LLDPE plant is running at close to the maximum rate.
The 200,000 tonne/year Dushanzi Petrochemical plant came on-stream late last year and Tianjin Petrochemical's 300,000 tonne/year facility started up in Q1 2010.
Ever-increasing volumes from these plants, both of which are in China, are being reported in the market.
The long-delayed 400,000 tonne/year Sharq facility in Saudi Arabia - the joint venture between SABIC and a Mitsubishi Corp-led consortium - also came on-stream recently.
Some more big start-ups are due later this year.
The Siam Cement/Dow Chemical 350,000 tonne/year plant at Mab Ta Phut in Thailand is due on-stream is expected to come onstream in September this year. Start-up has been delayed by environmental issues.
Dow uses the co-monomer is octene which we have been told is also in limited supply.
The Zhenhai Refining & Chemical Co 450,000 tonne/year project is due to come on-stream in China in Q2 with the 540,000 tonne/year Borouge facility in Abu Dhabi set for commissioning in the third quarter.
Add all this up and, according to my sometimes admittedly dodgy maths, this comes to 3.84m tonne/year of new capacity due on-stream between Q3 last year and end-2010.
Global LLDPE consumption was between 15-20m tonnes in 2008, according to petrochemicals consultancy, ChemSystems (see slide below).
In other words - even assuming a generous estimate of 20m tonnes for global annual consumption - new Middle East and Asian capacity starting up between Q3 last year and end-2010 represents approximately 20% of this demand.
An awful lot of existing plants would have to be either shut down or be running at low rates for this new production to be easily absorbed.
A lot of capacity in the West might still be idle as a result of weak demand.
And, as we've said, there's also the temporary relief from the co-monomer shortage.
"This is of course one heck of a lot of new capacity, but there is a global shortage of butene-1," said a source with a North American producer.
The shift of liquid-feed crackers to lighter feeds is being blamed for the butene-1 shortage.
US cracker operators have switched to lighter feeds because of the ethane cost advantage over naphtha.
We are looking into other factors behind the lack of butene-1 and how long it might last.