Petrochemical producers across Asia-Pacific are starting another round of output cuts at their crackers and downstream polymers plants from August and September, as weaker margins and bleak demand take hold.
Polymers demand in Asia has weakened during a seasonal lull since the beginning of this year's third quarter. But rising inflation globally further exerted pressure on demand for durable plastics goods, resulting in regional converters seeing a slowdown in their domestic and export goods orders. A currency depreciation against the US dollar have curbed consumers' purchasing power, especially in developing and least developed countries in Asia.
Polymers prices have fallen sharply across Asian markets in the past few weeks, mainly driven by expectations of persistently weak demand in the key Chinese market, as strict Covid-19 policies slow the nation's economic growth. This, coupled with weakening polymers demand out of Asia, have prompted international producers to offer competitively to secure spot transactions and alleviate inventory pressure.
But as polymers prices become relatively weak in comparison to feedstock crude, naphtha and propane costs, the majority of converters have now become wary of further price falls. This has led to them continuously seek supplies on as-needed basis. Buying interest remains weak given the price volatility, while polymers supplies have grown structurally longer since 2020 after with the addition of new capacity.
Producers trim output
The reduction in producers' cracker and derivative unit margins have prompted some producers to carry out general maintenance or bring forward planned maintenance at their plants, with some reducing production further and others considering cutting output.
South Korea's LG Chem decided to advance its 1.15mn t/yr Yeosu cracker turnaround from mid-October to mid-September, with the turnaround lasting until mid-December because of eroding cracker production margins. YNCC is also considering bringing forward its 470,000 t/yr No.3 cracker turnaround from early October but the exact start date is still under discussion.
Other major producers in South Korea will continue to operate at reduced rates or even further cut operations. KPIC will operate its Ulsan-based crackers at 85pc, while YNCC will reduce operating rates to 70-80pc in August and September for all its crackers. Lotte Chemical also cut its crackers run rates to 90pc in mid-July at its Yeosu and Daesan plants.
Taiwan's Formosa began an early turnaround in July at its 1mn t/yr No.2 cracker in Mailiao in response to persistent eroding production margins.
Malaysia's Lotte Titan has decided to cut its No.2 cracker operating rates from 100pc to 80pc from August. The producer is expected to shut its 115,000 t/yr high-density polyethylene (HDPE) unit for an unplanned maintenance and reduce production at its 640,000 t/yr polypropylene (PP) plant to around 80pc during the same period.
Indonesia's Chandra Asri will reduce operating rates at its 900,000 t/yr naphtha cracker from 85-90pc to 80pc from August. Thailand's PTTGC will continue to operate all its crackers at 80-90pc.
Thailand's IRPC planned to carry out a major maintenance at its refinery and petrochemical complex from late September to November. The planned maintenance will last for approximately 30-55 days and affect its downstream polyolefins and polystyrene production. IRPC operates a 775,000 t/yr PP plant and a 140,000 t/yr HDPE unit. Its downstream plants are likely to have maintenance during the same period.
Philippine producer JG Summit, which took off line its cracker and polymers units since late May, is planning to restart the corresponding units from late July after a two-month shutdown for general maintenance. The producer earlier shut its cracker capable of producing 480,000 t/yr of ethylene and 240,000 t/yr of propylene. Its 160,000 t/yr linear low-density polyethylene unit (LLDPE), 160,000 t/yr HDPE unit and 300,000 t/yr PP units were shut during the same period.
New capacity adds length
The planned start-up of new polyethylene (PE) and PP plants in 2022 is expected to further add supply length later this year. But current weaker margins and market conditions are preventing the start-up of some new plants, especially in China.
Around 2.9mn t/yr of PE and 4.5mn t/yr of PP new production capacity in China has yet to come on line and is expected to start up by end of this year.
The start-up of new capacity by Malaysia's PRefChem at Pengernag has been the subject of Asian market discussions since May. The producer, a 50:50 joint venture between Malaysia's state-owned Petronas and Saudi Arabia's state-controlled Saudi Aramco, began to restart its 1.29mn t/yr naphtha-based cracker in May and 350,000 t/yr LLDPE unit in July. Its No.1 450,000 t/yr PP unit is expected to start up in August. PRefChem also owns a 400,000 t/yr HDPE unit and another 450,000 t/yr PP unit, targeting a start-up from August.
JG Summit and Thailand's HMC Polymers have postponed the start-up their 250,000 t/yr HDPE unit and 220,000 t/yr PP unit respectively from mid-2022 to the second half of the year.
Indian producer HPCL-Mittal Energy's 500,000 t/yr PP plant started up in June. Its 800,000 t/yr LLDPE/HDPE swing unit and 450,000 t/yr HDPE unit are expected by participants to start up in late third quarter this year.
US and Canada-based polymers producers are also expected to add 2.7mn t/yr of PE and nearly 1mn t/yr of PP new capacity by the end of this year, further adding to global supplies.
