Thailand's Siam Cement (SCG) plans to reduce operating rates at its polyethylene (PE) and polypropylene (PP) plants from 100pc to 80pc in April, on high feedstock costs and margin concerns.
SCG operates a 152,000 t/yr low-density PE plant, a 120,000 t/yr linear-low density PE plant, a 920,000 t/yr high-density PE (HDPE) plant and a 720,000 t/yr PP plant in Map Ta Phut, Thailand. Its upstream naphtha-based crackers are expected to see similar production cuts for the same period.
SCG's production cut is expected to tighten duty-free HDPE and PP supplies, its main export grades, in southeast Asia. The producer is also expected to shut a 140,000 t/yr PP unit from late April to late May for a planned maintenance.
The Russia-Ukraine conflict has driven upstream crude oil and other feedstocks prices to multi-year highs, including naphtha, a feedstock for majority of southeast Asian producers. The spike in naphtha prices early this month were eroding margins of regional PE and PP producers, but higher PE and PP prices seem difficult to achieve in the short term on weak downstream demand. Such concerns were heard among regional producers and considerations for similar production cuts are taking place.
Downstream plastics converters were generally resisting higher PE and PP offers, citing that they will not be able to fully pass on the sharp increase in resin costs to end-users of the finished goods.
Most southeast Asian converters have switched to buying on an as-needed basis on price uncertainty and expectations of inflated PE and PP prices when demand remains stable.
Elsewhere in southeast Asia, Indonesia's Chandra Asri also cut operating rates at its 736,000 t/yr PE plant and 590,000 t/yr PP plant to 85-90pc on similar margin concerns. Philippines' JG Summit and Thailand's PTTGC have reduced their cracker operating rates since last December on the back of high feedstock costs.
Argus assessed duty-free HDPE film and PP raffia prices at $1,390-1,410/t and $1,470-1,510/t cfr southeast Asia respectively on 4 March 2022, up by $40-50/t from the previous session.
