Mideast chemical supply tight on container shortages, Asian plant shutdowns

Felicia Loo


SINGAPORE (ICIS)–Middle East’s petrochemical markets are facing tight supply, mainly due to shortage of containers, with shipment difficulties to last until March.

Plant shutdowns in Asia exacerbated the tight supply conditions, overshadowing demand from strong to stable in certain sectors in the Middle East.

Base oils supply are critically short because crude runs have been reduced.

Many producers are trying to keep up with a backlog of contract requirements, hence they are not allocating anything for spot market.

Iran is one of the biggest suppliers in the region and their shipping lines are under US sanctions.

In polyethylene, supply in the Middle East remains limited on strong demand for regional cargoes in major export markets, in the absence of export availability from US, leading to major regional producers selling out their allocations for key grades.

On polypropylene (PP), curtailed spot availability for the month has meant that most suppliers have sold out allocations and are poised to announce February prices later this month.

Market players in Jordan look forward to better demand emerging in February, as the government announces the lifting of pandemic restrictions in phases and the weekly Friday curfew was also ended.

The supply conditions were more critical in the case of Middle Eastern bases oil, with a sharp shortfall reverberating in the region.

Spot availability from any of the main producers either in the Middle East or Asia continued to face extreme shortages.

In fact, there was a higher incentive for Iranian refiners to export base oil cargoes to India instead of the UAE, compounding the thin supply situation.

Meanwhile, on crude oil outlook, demand may face some negative pressure once again in the near term as new highly-transmissible coronavirus strains spread rapidly across the globe.

Many countries, including the UK, Germany and Japan, have already re-introduced or extended restrictions, with many more countries likely to follow their lead if the number of cases continues to rise.

However, the market will see significant support from Saudi Arabia’s plan to cut production by 1m bbl/day in February and March.

In other chemicals, weak spot consumption for polymeric methylene diphenyl diisocyanate (PMDI) persists in the Middle East.

Demand from the construction sector in the GCC did not pick up and remained on the downtrend, overshadowing prospects of container shortfall in coming weeks.

But, on the other hand,  toluene diisocyanate (TDI) in the Middle East  was underpinned by improving downstream polyurethane (PU) foam demand.

Supply of 10-13.5% polyether polyol (POP) was tight in the Middle East, while demand remained stable.

Korean producers had mostly sold out their cargoes for January and February thus keeping conditions tight, with the ongoing container shortages worsening the situation.

Polyethylene terephthalate (PET) buyers in the Gulf Cooperation Council (GCC) region have seen a delay of about one to two weeks in receiving their previously booked Asian cargoes that has become common given the recent tightness in container and shipping availability.

A slew of turnarounds in Asia meant less sales pressure from Asian suppliers to sell to the Middle East that sits in well with buyers preferring to buy regional cargo for better security in cargo delivery.

In China, Zhejiang Wankai New Materials shut its 400,000 tonne/year plant for maintenance in November last year, with the shutdown to last more than a few months and no restart date in sight.

China Resources Chemical shut its 400,000 tonne/year plant for a month-long maintenance that started in end-December.

A plant in Taiwan was planned to have maintenance around mid-January that may stretch longer than one month.

India’s IVL Dhunseri started maintenance for one PET line in early December last year and postponed the estimated restart date to end-January.

Additional reporting by Veena Pathare, Izham Ahmad, Prateek Pillai and Hazel Goh

Focus story by Felicia Loo


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