Mideast polymers face pressures as Borouge 3 enters market

Focus article by Muhamad Fadhil

ABU DHABI (ICIS)–Polymer prices in the Middle East may come under pressure towards the end of the year, with new supply hitting the markets from Borouge’s third phase of expansion (Borouge 3) in the UAE, industry sources said on Monday.

“We are seeing an oversupply in the polymer market. Once new material from Borouge comes in, we will see even more supply. More supply than demand,” according to a major Middle East polymer distributor.

On 17 October, high density polyethylene (HDPE) prices in the Middle East were assessed at $1,560-1,590/tonne cost and freight (CFR) Gulf Cooperation Council (GCC), while polypropylene (PP) raffia (flat yarn) prices were assessed at $1,520-1,580/tonne CFR GCC, according to ICIS.

The GCC region consists of the UAE, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait. 

Sales from Borouge’s new derivative plants are expected to start soon following successful tests at the units, industry sources said.

The new petrochemical complex in Abu Dhabi comprises a 1.5m tonne/year ethane cracker and derivative plants, including HDPE and linear low density PE (LLDPE) units with a combined capacity of 1.08m tonnes/year; a 350,000 tonne/year low density PE (LDPE) unit; and two PP units with a combined capacity of 960,000 tonnes/year.

Borouge 3’s PE units were started up in end September or early October, while PP units are expected to start operations by the end of the year, according to an industry source in Asia, but these could not be confirmed with the company.

“Borouge is starting its first sales for PE from its new plants,” according to a source based in Dubai.

The company is expected to sell prime PE material in the Middle East “in the coming weeks or months”, according to a separate polymer source in Dubai.

The new plants will raise Borouge’s olefins and polyolefins capacity to around 4.5m tonnes/year from 2m tonnes/year currently.

PE sales from these new plants, however, are coming at a time when supply is long in the market, industry sources said. 

Market pressure may also filter through to Asia and Europe, where the new Borouge products will be exported from early next year, a Middle East trader said.

Borouge may price its products competitively once the new output becomes available and suppliers in Asia and Middle East may be pushed to match the lower offers, according to a separate source based in the GCC.

In Asia, the Chinese market is being weighed down by too much capacity expected to come on stream for both PE and PP this year.

Buyers in Asia and the Middle East are currently not purchasing new polymer volumes amid price declines in the upstream crude oil markets.

Crude futures took a beating after global economic watchdog – the International Monetary Fund (IMF) – cut its world growth forecasts for 2014 and 2015 to 3.3% and 3.8%, respectively, confirming concerns over weakening demand in an oversupplied market.

Brent crude plunged to a four-year low, while US crude has slumped near a two-year low before slightly recovering towards the end of last week.

At 05:00 GMT, November US crude futures were trading at $83.12/bbl, while Brent crude for December delivery stood at $86.16/bbl.

“Everyone is worried about the impact of increased supply from Borouge and the current uncertainty in the oil market,” a Middle East polymer source said.

Borouge is a joint venture between Austria’s Borealis and the Abu Dhabi National Oil Co (Adnoc).

Additional reporting by Linda Naylor and Doreen Zhao

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections