Malaysia’s PRefChem eyes Johor complex restart amid Asia demand worries

Pearl Bantillo

17-May-2022

SINGAPORE (ICIS)–Malaysia’s Pengerang Refining and Petrochemical (PRefChem) is widely expected to restart its manufacturing complex soon, after more than two years of outage, which would inject fresh supply in Asia at a time of soft demand.

Some market sources said the refinery and cracker could be in the process of restarting, with others saying the downstream polymer units could resume production in June.

PRefChem has yet to respond to ICIS’ query on the issue, at the time of writing.

Its site in Johor, Malaysia, houses an integrated refinery and petrochemical complex.

Naphtha output from its 300,000 bbl/day refinery will be fed to the cracker, which can produce 1.2m tonnes/year of ethylene and 609,000 tonnes/year of propylene, for captive use of downstream units.

If fully operational, PRefChem’s annual petrochemical production capacity is expected to be 7.7m tonnes.

The restart may weigh on overall sentiment across the petrochemical markets in Asia, coming at a time of downbeat demand amid continuing COVID-19 lockdowns in China.

Olefin production margins in Asia have remained squeezed by high feedstock costs, prompting regional cracker operators to keep output curbed.

Regional supply, nonetheless, may still be long, given severe weakness in demand.

While not expecting fresh supply to hit the spot market when PRefChem restarts, the naphtha market has been bearish, with recent prompt cargoes fetching discounts.

In the downstream polyethylene (PE) markets, some apprehensions remained, over whether the planned restart could be carried out without any major hiccups, according to sources close to the matter.

PRefChem’s downstream units are expected to produce linear low-density PE (LLDPE) and polypropylene (PP) at the initial stages, the sources said.

The company can produce 350,000 tonnes/year of LLDPE, 400,000 tonnes/year of high-density PE (HDPE) and 900,000 tonnes/year of PP at the site.

If the restart is successful, the additional capacity is expected to have a major impact on the southeast Asian market, especially in current market conditions where China’s market is effectively closed to imports due to the lockdowns.

This would mean PRefChem would probably try to sell most of their available volume to southeast Asia, a market that is already struggling with poor downstream demand.

For some buyers though, the resumption of supply from PRefChem could mean better days ahead, as they would then have more diversity in terms of PE supply which, they hope, could equate to more price competition.

Suppliers, however, are concerned because they expect pre-sales of PRefChem cargo to be priced below market levels, in order to build acceptance of the new product.

“We have to stand by for [market] turbulence,” a market player said.

PRefChem’s Johor site was in the process of starting up when a fatal fire hit the diesel hydrotreating (DHT) unit at the refinery in mid-March 2020, shutting down the whole complex.

The company, which comprises Pengerang Refining and Pengerang Petrochemical, is a 50:50 joint venture between energy firms PETRONAS of Malaysia and Saudi Aramco.

Focus article by Pearl Bantillo

Additional reporting by Melanie Wee, Izham Ahmad and Julia Tan

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