Vietnam's polypropylene (PP) supplies are expected to remain tight in March because of reduced domestic production and tightening import availability.
Vietnam's Nghi Son Refinery and Petrochemical (NSRP) encountered an electrical supply issue in mid-February, which led to the shutdown of its 200,000 b/d refinery. The producer shut its downstream 370,000 t/yr PP unit around the same time, which receives feedstock from the refinery. The PP unit was shut for around two weeks, tightening domestic PP supplies, before resuming operations at the end of February or early March.
South Korea's Hyosung, the newest PP producer in Vietnam, is running its 300,000 t/yr PP plant at reduced rates of around 70-80pc because of feedstock shortages since early March. The PP plant started up in the first quarter of 2020 as part of the project's first phase and is operating using outsourced propylene. The second phase of the project includes the addition of a 600,000 t/yr propane dehydrogenation plant and another 300,000 t/yr PP unit, which are expected to come on line late in the second quarter or third quarter of 2021.
In southeast Asia, Thailand's IRPC — a key exporter of PP to Vietnam — is also operating its PP complex at reduced rates similarly because of feedstock propylene shortages. The complex can produce up to 775,000 t/yr of PP. The Rayong-based petrochemical producer is cutting its PP exports while prioritising domestic demand and focusing on clearing a backlog of orders, but it is unclear if IRPC is reducing PP offers to Vietnamese buyers.
Middle East producers have also kept PP offers high or reduced exports to Vietnam since January because of firm demand and higher sales netbacks in other markets. The trend is expected to continue in the short term because of huge production losses in the Americas, which have further tightened global PP supplies.
A recent rise in global PP prices could encourage Vietnamese producers to resume PP exports beyond Asia-Pacific, which were reduced earlier this year as high freight costs limited long-haul trades. And the availability of China-origin PP raffia offers to Vietnam, priced competitively at around $1,430-1,450/t cfr Vietnam in the first half of March, could partially offset reduced PP supplies from other producers.
China can export PP to Vietnam with zero import tariffs because of the Asean-China free trade agreement. Vietnam has been the largest importer of Chinese PP over the past five years, taking an average of 140,000 t/yr or 35pc of China's total PP exports during 2019-2020.
PP raffia prices in Vietnam were at $1,440-1,480/t cfr Vietnam on 11 March, according to Argus data, up by $270/t at the mid-point from $1,180-1,200/t cfr a month ago.
