Chinaplas: Optimism, consolidation, new plant start-ups and more

By Malini Hariharan

Chinaplas has just concluded and my colleagues have filed some great reports from Shanghai.

Worries about a margin squeeze in the second half of the year persist but polymer producers seem to be increasingly confident about long-term growth prospects.

The chairman of the China Plastics Processing Industry Association (CPPIA) talked of the endless potential of China’s domestic market and confidently predicted that the country would have no problems in delivering a 10% growth in demand for polymers and rubber.

“Last year, people were uncertain about what the long term market outlook would be. But the situation looks very positive now,” said William Yau, chief executive officer (CEO) for Borouge’s marketing arm (see video interview below*).

But in the short term, although demand and supply were normal, there could be ups and down, he admitted.

Yau also said that Borouge II would start up in mid-2010 but the full polyolefins output of 2m was likely to be achieved only by the end of the year or early next year.

The PP industry should be able to escape from another round of restructuring, said Anton de Vries, senior vice president for Europe, Asia and international olefins and polyolefins at LyondellBasell.

“I personally don’t expect to see major consolidation in the PP sector. I may be wrong, but I think it’s going to be limited, more limited than what we saw in the downturn (in early 2000s),” he said.

The PP sector had gone through a major rationalisation process in the previous downturn in the early 2000s, and further consolidation would be “more difficult,” he said.

He also expected LyondellBasell to exit Chapter 11 bankruptcy protection as early as next month and list on the New York Stock Exchange (NYSE) in Q3.

Jamail Malaikah, president and chief operating officer of National Petrochemical Industrial Co (Natpet), the Saudi PP producer described the outlook for the PP industry as excellent.

Not surprisingly, he was not worried about the overcapacity that has been built up in PP and expected Middle East plants to run at full rates.

“We believe most of these plants will be running at a good operating rate in the second half [of] 2010. But I think the impact of the overcapacity on price will not be of high magnitude,” he said.

He was also optimistic that the upcoming propane price revision in the Kingdom would turn out to be favourable for producers.

And he also talked about the reasons for the frequent operating problems in the Middle East.

Malaikah said the quality of engineering materials used in building petrochemical facilities may have deteriorated due to mass production necessitated during the plant construction boom in 2005.

“There was a lot of pressure on services, EPC (engineering, procurement and construction) contractors, on vendors, on engineering manpower. The pressure caused some vendors to produce more than their capacity, at the expense of quality,” he said.

In other production news, Qatofin is likely to achieve commercial production at its new 450,000 tonnes/year lldPE plant in May or June.

Siam Polyethylene, the Dow Chemical and Siam Cement lldPE joint venture, expects to start operations at its delayed 350,000 tonnes/year plant in the H2 2010.

“We have been given clearance to resume construction which is excellent news as this product is much-needed by the market,” said Peter Wong, Commercial Vice-President, Asia-Pacific Basic Plastics, at Dow.

The project had been due on-stream in the first half of year, but work was temporarily halted by a court injunction that have affected numerous other projects at the Mab Ta Phut site in Thailand.

And Siam Cement’s president also revealed that the company is looking for acquisition opportunities in Asia.

“We believe that [Asia’s petrochemical sector] will go through more acquisitions and we’re now looking for acquisition opportunities as well,” said Cholanat Yanaranop.

(More videos from Chinaplas are available here)

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