SE Asia industries suffer output cuts amid raging COVID-19 battle

Author: Nurluqman Suratman


SINGAPORE (ICIS)--Petrochemical downstream industries in southeast Asia have been running at reduced capacity on poor demand, amid an ongoing battle with the fast-spreading Delta coronavirus variant and slow vaccine rollouts in the region.

Recent restrictions imposed to stem the strong tide of infections have forced several downstream end-market producers either to shut down or cut operating rates at their facilities due to reduced on-site manpower.

Most chemical complexes in the region, however, are running as they are deemed as among “essential industries”.

"A lot of factories reduced production rate because of COVID-19, some closed production by up to 50%. (Plastic) converter mood is very bad; they are giving a lot of sad stories," an Indonesian market source said.

Malaysian oleochemical makers Emery Oleochemicals and Southern Acids Industries have both declared force majeure on supply, according to customer notices seen by ICIS.

Their operations are not classified as essential industries under Malaysia's latest enhanced movement control order, which is in effect for about two weeks until 16 July.

"Our production and manufacturing activities, incoming feedstock supply and outbound delivery of our oleochemical products to customers have ceased, in compliance with the Government order," Emery Oleochemicals said in its notice to customers.

Ethyl acetate (etac) markets in southeast Asia are also bracing for strong headwinds heading into the third quarter, with spot market discussions for August delivery showing signs of softening as of 15 July.

Only just a month earlier and prior to the acute rise in infections in the region, when demand was still steady, etac prices touched an all-time high, in part driven by supply tightness on the upstream acetic acid front.

In the soda ash market, buying momentum in Vietnam has slowed down as Ho Chi Minh City - the country’s economic hub - on 9 July entered a two-week lockdown.

“[There’s a] lockdown so many factories have to close, many workers [are] infected.. it’s very bad now,” said a soda ash distributor adding that some of his customers were affected.

In Malaysia, downstream soda ash factory operations are being curtailed by manpower shortages, while high ocean freight rates are crimping demand for exports of finished goods.

“Our plant has a lack of manpower at only 60% of normal levels so operating rates have dropped by 40-50 percentage points since end-May,” said a detergents manufacturer.

In the polyethylene (PE) market, demand across many of southeast Asia’s biggest markets has been dented as downstream production facilities have either closed or reduced production levels.

In Malaysia, some PE pipe converters were running at reduced rates of 30-50%.

In Thailand, there are fewer construction workers available amid rising COVID-19 infections, further limiting downstream pipe installations.

Demand for imported cargoes have slowed down as a number of plastic converters have completed restocking for their immediate requirements.

“If a company can't arrange for all workers to eat & sleep & stay in factory, they have to stop production," a Vietnam-based plastic converter source said.

"I myself work from home for two months already and I and don't sell much (finished products) from this week because low demand, factory stop production or reduce production rate.”

“Also, we can't deliver cargo from port/warehouse to customer's factory because the government bans travel," the converter said.

Indonesia, Thailand, Malaysia and Vietnam all reported all-time highs of COVID-19 infections this week as authorities struggle to tackle the region's biggest wave of infections so far.

Thailand on Friday reported a daily record of 9,692 infections, taking the total number of cases to 381,907 since the start of the pandemic, while Vietnam reported all-time high in daily COVID-19 cases at 3,416 on 15 July.

Indonesia's Ministry of Health on 15 July reported a record 56,757 cases with 982 deaths, while Malaysia added a record 13,215 COVID-19 infections.

Strict movement restrictions have been put in place in recent months as overall vaccination rate in southeast Asia significantly lags behind those in Europe and North America.

Malaysia entered its third nationwide lockdown on 1 June, while Indonesia has imposed emergency restriction on the islands of Java and Bali - home to around 60% of its population.

SE Asia Vaccination Rates

Focus article by Nurluqman Suratman

Additional reporting by Izham Ahmad, Helen Lee, Helen Yan, Hazel Goh and Melanie Wee

Photo: Jakarta International Container Terminal, Indonesia - 28 February 2021 (By Anton Raharjo/NurPhoto/Shutterstock)

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