Asia petrochemical makers recalibrate output amid pandemic-hit demand

Author: Pearl Bantillo

2020/04/03

SINGAPORE (ICIS)--Petrochemical producers in Asia are looking at further reducing output in the face of a sharp demand downturn and low crude prices that could last months amid a coronavirus pandemic.

Some downstream plants are bringing forward scheduled turnarounds to manage a strong inventory build-up, while economic activity in a huge swathe of the globe has virtually halted due to lockdowns.

“Feedstock purchasing and petrochemicals selling risks are … at levels that none of have seen before. Get it wrong and companies face going out of business,” ICIS senior Asia analyst John Richardson said.

“The only sensible approach for those in difficult cash positions will therefore be to minimise operating rates even at the risk of losing out on volumes,” he said.

“The bigger players might thus be in a position to gain more share of the market that’s left, but assessing the market that’s left will remain extremely difficult,” Richardson said.

For crackers in Asia, the second quarter is typically a heavy turnaround season, with those in Japan expected to proceed with maintenance as planned.

In Thailand, Map Ta Phut Olefins Co (MOC) is likely to postpone the 45-day turnaround of its cracker to the fourth quarter from May as a measure to reduce risk of spreading the deadly coronavirus.

Ethylene supply in southeast Asia is higher than expected for April due to downstream production cuts in view of the 21-day lockdown in India, which is a major import market for the region.

In the monoethylene glycol (MEG) market, integrated producers are taking advantage of low-cost weak crude to boost operation, but may soon have to consider output cuts due to dwindling demand for downstream polyester.

“If there is no demand, where are the cargoes going? Producers have to cut the supply sooner or later,” a regional trader said.

In the vinyl acetate monomer (VAM) market, Celanese and Dairen have taken to reducing output at their Singapore and Taiwan plants, respectively, due to weakened demand from India, which is under a nationwide lockdown for 21 days from 25 March.

Buyers in India have had to cancel shipments from China, southeast Asia and Saudi Arabia.

Meanwhile, VAM plants in China and Japan are scheduled to undergo maintenance in the second quarter.

For ethylene vinyl acetate (EVA), Taiwanese major Formosa Plastics has further reduced production after prices plunged to levels last seen in 2004/2009 amid the lockdown in India and a weak market recovery in China.

For ethyl acetate, squeezed margins caused by falling prices, as well as prospects of much weaker exports, prompted Chinese producers Jiangmen Handsome and Guangxi Xintiande cut their April output.

More producers in China will likely consider output cuts, while a southeast Asia-based producer has shut its plant in April for a 10-day turnaround.

In the acrylonitrile (ACN) market, major producers in Japan, South Korea and Thailand have reduced operating rates to 70% from 100% previously.

For acetone and phenol, producers outside China are mulling cutting production amid bearish markets.

Saudi Arabia’s Petro Rabigh and Mitsui Phenol Singapore are due to restart their plants from scheduled maintenance in the second half of April.

In Japan, Mitsubishi Chemicals’ plant is due for a turnaround in May, while Mitsui Chemicals’ Osaka plant will undergo maintenance from June.

In China, Chang Chun Petrochemical started a planned maintenance, while in India, Deepak Phenolics’ plant has had an unplanned turnaround due to the nationwide lockdown and is due to restart in mid-April.

In the bisphenol A (BPA) market, some producers in northeast Asia are looking at reducing operating rates, or possibly schedule plant maintenance in May/June if weak market conditions persist.

The market is under pressure from poor downstream demand and growing supply.

“We are ready to be flexible in adjusting production and watching the market,” said a northeast Asia-based market source.

In the phthalic anhydride (PA) market, a heavy wave of second-quarter turnarounds is expected in northeast Asia, involving about 350,000 tonnes/year of production capacity.

But with demand dissipating even faster than expected, amid sudden virus-induced market closures in India and southeast Asia, some producers are heard looking to adjust and bring forward their turnaround schedules, in the hope that when the virus situation stabilises later, they would be ready to trade too.

South Korea’s OCI is a case in point, as its 80,000 tonne/year PA plant was shut this week, nearly three weeks earlier than original plans.

In the melamine market, operating rates at Chinese plants could fall further from the current average of around 65% due to falling exports on poor demand from India and southeast Asia.

“I believe more and more producers will cut operation soon,” a major Chinese producer said.

Partial and full lockdowns are in place for most countries in Asia, with tighter restrictions on people movement recently adopted by Indonesia, Vietnam, Thailand and Singapore.

There is a strong possibility that lockdown periods across major cities in the world would go beyond original schedules as the number of confirmed coronavirus cases continue to mount, along with the death toll.

The coronavirus has infected more than 1 million people worldwide as of Friday, based on latest data from US-based Johns Hopkins University (JHU).

The global economy is now in recession amid the costly battle against the  deadly flu-like virus that originated in China's central city of Wuhan late last year.

Focus article by Pearl Bantillo

Additional reporting by Angeline Soh, Melanie Wee, Ai Teng Lim, Yeow Pei Lin, Judith Wang, Li Li Chng and Helen Lee

Visit the ICIS Coronavirus topic page for analysis of the impact on chemical markets and links to latest news.

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