India polymer production woes exacerbate supply shortage

Focus story by Muhamad Fadhil

DUBAI (ICIS)–India is grappling with short supply of polyethylene (PE) and polypropylene (PP) given less volumes coming out of the Middle East, aggravated by production disruptions at the country’s polymer facilities, industry sources said on Friday.

Import offers have been rising as suppliers attempt to leverage on domestic shortage of polymers, they said.

High density PE (HDPE) and linear low density PE (LLDPE) film for late July or August delivery from the Middle East are being offered this week at mid-$1,600/tonne CFR (cost and freight) India levels.

PP raffia offers, on the other hand, are at mid- to high-$1,500/tonne CFR India levels for the same shipment period.

On 4 July, HDPE film prices were assessed at $1,610-1,640/tonne CFR India, up by an average of $55/tonne or 3.5% from four weeks earlier, according to ICIS data.

LLDPE film prices, on the other hand, rose by an average of $35/tonne or 2.2% over the same period to $1,630-1,670/tonne CFR India, the data showed.

PP raffia was assessed at $1,550-1,570/tonne for the same time period, $30/tonne higher compared with early June prices, according to ICIS.

Domestic producers had increased their PE and PP offers by Indian rupee (Rs) 1-2/kg from 1 July. Effective 11 July, they implemented another Rs1.0-1.5/kg hike on LLDPE and HDPE film and PP raffia prices, and kept low density PE (LDPE) film prices unchanged.

“Local supply for both PE and PP is affected by recent shutdowns in India,” according to a Mumbai-based trader.

Haldia Petrochemicals’ polymer plants in eastern India have been shut since 7 July, because of technical woes at its cracker. The plants are expected to be down for at least 15 days, industry sources said.

The company operates a 370,000 tonne/year HDPE/LLDPE swing plant, a stand-alone 330,000 tonne/year HDPE facility, and a 340,000 tonne/year PP plant in Haldia, according to ICIS data.

In Bathinda, HPCL-Mittal Energy Ltd (HMEL) has halted production at its 440,000 tonne/year PP unit – following a fire at its 180,000 bbl/day refinery at the site in late June – that could last at least a month, industry sources said.

Other polymer producers in India include Reliance Industries Ltd (RIL), Indian Oil Corp (IOC) and GAIL Ltd.

The recent spikes in polymer prices in India are not sustainable, according to end-users and traders, who were expecting prices to correct by month end, when supply from the Middle East normalises.

Middle East producers have cut back on production since end-June with the start of month-long Muslim fasting month of Ramadan.

“Production of polymers slows down in the Middle East during Ramadan because operators work fewer hours,” said a source close to a Saudi producer selling polymers into India.

An Indian-based PE trader referred to the strong price gains of polymers as “a bubble” that  “will burst once Ramadan is over, as supply will get back to normal.”

India imports significant volumes of Middle East PE and PP as well as from Asia to make up for any shortfall in supply that could not be filled up by domestic production.

At times, the country also procures imported cargoes to leverage on foreign exchange fluctuations of the Indian rupee against the US dollar.

Apart from reduced output in the Middle East because of Ramadan, the region is also having its share of production problems.

Oman Oil Refineries and Petroleum Industries’ (Orpic) 340,000 tonne/year PP plant in Sohar is shut down since June 25 due to the scheduled maintenance of a residue fluid catalytic cracking (RFCC) unit at the same site, industry sources said.

The RFCC unit produces 327,000 tonnes/year of propylene, providing the feedstock for the PP plant.

In Asia, polymer facilities are also either having production troubles or are due for scheduled turnaround that exacerbates the tight supply of PE and PP.

“We are hearing shortage not only in India and the Middle East but Asia as well,” according to an Indian based end-user.

In Malaysia, Lotte Chemical Titan shut down its 120,000 tonne/year HDPE plant in the state of Johor in early July due to technical problems.

In China, Sichuan Petrochemical plans to take its 300,000 tonne/year LLDPE plant off line for a week-long scheduled maintenance from 14 July.

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