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PE || PP grow in 2009 in China, but supply to outpace demand growth in 2010

PE || PP grow in 2009 in China, but supply to outpace demand growth in 2010

12-Mar-10
A decline in consumption of polyethylene (PE) and polypropylene (PP) in China in 2008 has rebounded at a healthy pace in 2009. This is apparent from import figures for 2009 vs 2008 levels - HDPE imports in H1-09 were almost 90 % higher, other PE imports were higher by about 50-60%, PP imports were about 50% higher. Total import of PE in H1-09 was 3.75 mln tons as compared to 4 mln tons for the entire 2008. Demand of PE & PP was supported by increased domestic requirement driven by new economic stimulus provided by the Chinese Government. As per ICIS, China's PE and PP consumption - the world�s largest polymer resin importer - rose to around 16 mln tons and 13 mln tons respectively in 2009, up 38% and 27% from 2008, including local output and imports. Demand growth for polymers this year has been driven by re-stocking on the back of the Chinese government�s massive economic stimulus package.
China�s capacity to produce polyethylene and polypropylene will expand at a double-digit pace next year, while demand growth is expected to ease, as per CBI. Polyethylene (PE) capacity would jump by 1.99 mln tons in 2010 to 11.1 mln tons, while its ability to produce polypropylene (PP) would increase by 2.74 mln tons to 12.7 mln tons. This will include not only new capacities due to start next year, but the impact of plants that were commissioned in H2-09. Demand for the polymers would continue to increase in China but the extraordinary growth witnessed this year may not happen again. This is partly explained by the low base in 2008, when there was a severe weakness in demand and consumption of different grades of PE and PP had either fell or had very minimal growth. PE demand would rise 7.1% next year to 16.27 mln tons in 2010, while PP demand would grow 12% to 14.55 mln tons next year, moderating from the projected 31.5% surge in demand for PE and 24% jump for PP in 2009. Recovery of exports of finished plastics products since the middle of the year should also bode well for the PE and PP market.

PE and PP Start-ups in China in 2010
Grades Company Capacity in kilo ton Scheduled Start-Up
HDPE Tianjin PC 300 Q1 2010
Zhenhai Refining & Chemical Co 200 Q1 2010
Baotou Shenhua 200 Q3 2010
LLDPE Tianjin PC 300 Q1 2010
Zhenhai Refining & Chemical Co 250 Q1 2010
PP Tianjin PC 450 Q1 2010
Zhenhai Refining & Chemical Co 300 Q1 2010
Dagang PC 100 Q1 2010
Ningxia Shenhua 500 Mid-2010
Baotou Shenhua 300 Q3 2010
Guangxi PC 200 Q3 2011
Luoyang PC 140 Q3 2012
(Source: CBI)
Besides supply growth in China, Asian polyethylene (PE) and polypropylene (PP) markets are bracing for a tidal wave of resin supply expected to hit regional markets in H2-2010 from Middle East as well. About 4.7 mln tpa of PE and 4 mln tpa of PP capacities are expected to start-up in 2010 in Asia and the Middle East. An estimated 5.6 mln tpa of PE and 4.5 mln tpa of PP nameplate capacity came on stream in 2009 in the two regions but a large proportion of the new plants were still not running at full rates. Traders opine that the regional powerhouse China might not be able to absorb such a large increase in polymer capacity as the government continues with credit tightening. However, the impact of new capacities on prices remains unclear. PE and PP prices could remain relatively high if crude oil values rose further and if production issues continued to plague Middle East polymer producers. Cost-advantaged makers in the Middle East are expected to add around 2.2 mln tpa of PE and 1.65 mln tpa of PP this year. However, the full impact of these start-ups was likely to percolate to the market only by late 2010 or early 2011. In 2009, Middle East petrochemical exporting countries including Saudi Arabia, Kuwait, UAE, Egypt, Oman and Iran; had 3.9 mln tpa of PE and 1.8 mln tpa of PP capacities coming on stream. However, these plants experienced problems caused by a dearth of skilled manpower and shortage of feedstocks such as ethane and propane. The estimated surplus available for export from the Middle East was at 11.4 mln tpa for PE and 5.2 mln tpa for PP in 2009. In 2010 the surplus is expected to rise to 13.49 mln tons for PE and 6.77 mln tons for PP, assuming all plants ran at full rates, as per ICIS pricing. The actual volume that hit the export market in 2009 from the Middle East, estimated at 4.5 mln tpa for PE and 1.4 mln tpa for PP - was far lower than the nameplate surplus. Hence the pressure on prices expected late last year and early this year never happened, and values have continued to rise.
Several Middle East plants continue to run at lower rates. Al Waha Petrochemical�s PP plant at Al Jubail is running at 70% of capacity after restarting last week following a three-week outage due to technical problems. Oman Polypropylene shut down its plant at Sohar for a two-month turnaround in February while Advanced Petrochemical Co�s PP plant will be taken off line in March for three weeks of scheduled maintenance and Petro Rabigh�s linear low density PE (LLDPE) plant, which started up in 2009 continues to run at low operating rates due to technical issues. Although the government has provided assurances that gas supply to the industry will increase significantly in the next two years, producers are currently facing a severe shortage, with household consumption being given priority over industrial demand. In Saudi Arabia, cuts in oil production imposed by OPEC have reduced supply of associated gas, while in Kuwait, increasing demand for gas by the power sector, especially in summer, has severely restricted availability for petrochemical production. In Iran, lack of foreign investment has stalled gas extraction projects in the South Pars region while rising heating demand in winter has caused existing supply to be diverted to households. The silver lining against over supply is growing requirement for polymers in the key China and India markets. In India, the PE shortfall is rapidly increasing, with demand growth expected to grow in double digits in 2010 due to strong gross domestic product (GDP) growth.
China�s PE and PP �implied� consumption was expected to grow by double digit this year, but much lower than last year�s 38% and 27%, according to industry estimates. Consolidation in Europe and possibly in the US due to poor economics could also lead more Middle East supplies to Europe, and help ease the oversupply in Asia.
MIDDLE EAST START-UPS 2010/2011
Company County Plant Capacity ('000 Tonnes) Expected Start-Up
Amir Kabir, Iran Iran LDPE 300 Q1 2010
Borouge 2, Ruwais Abu Dhabi PE 540 June 2010
Qatofin, Meassaieed Qatar LLDPE 450 Jan 2010
Q-Chem, Messaieed Qatar HDPE 350 Q2/Q3 2010
Kermanshah Polymer, Iran Iran HDPE 300 2010
Saudi Kayan, AL Jubail Saudi Arabia HDPE 400
MD/HDPE 300
2010-2011
Borouge 2, Ruwais, Abu Dhabi UAE PP 800 Mid 2010
EPPC Egypt PP 400 Mid 2010
Saudi Kayan, AL Jubail Saudi Arabia PP450 2010-2011
ASIAN START-UPS 2010
Sun Allomer Kawasaki, Jaban PP50 April 2010
PTT Chemical MAb Ta Phut, Thailand LLDPE 400
HDPE up by 50 to 300
LDPE 300
LLDPE started up early 2010
HDPE/LDPE maybe 2010
BPE Mab Ta Phut Thailand HDPE 400 Jan 2010
Siam Cement Map Ta Phut, Thiland LLDPE 350 Maybe 2010

 
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