Turnarounds in April to tighten polyolefin supply in Asia

Several plants in Middle East and South East Asia are scheduled to shut down on maintenance turnarounds, impacting the supply of polyolefins in Asia. March and April PP production in the Middle East has slowed by turnarounds, as per Platts. UAE's Borouge Petrochemical Complex at Ruwais, with a nameplate PP capacity of 1.76 mln m tpa, shut its two polypropylene lines in February for repairs, then continued to operate at less than full capacity in March due to feedstock shortage, according to the company. Oman ORPIC's 360,000 m tpa PP plant is currently in the middle of a two-month turnaround to be completed end-April, which will lead to reduced allocations to China in March and April, according to sources. At least three major April turnarounds in China will also reduce available domestic cargoes for the month, as per industry sources in Platts: Shenhua shut its coal-to-olefin integrated facility at Baotou city on April 1 for a 45-day turnaround, taking out 300,000 m tpa of PP capacity. Sinopec shut its refinery and its integrated downstream units at Wuhan city in Hubei province on April 3 for a 45-day turnaround, including its 400,000 m tpa PP capacity. Zhangjiagang Yangtze River Petrochemical shut its 400,000 m tpa PP plant in Jiangsu province for a 20-day turnaround in early April. These turnarounds represent more than 100,000 mt of unrealized production, meaning tighter PP supply in April for the China domestic market, potentially closing the export window to Southeast Asia in the short term. Current trend points to a continued rally of PP prices in China in Q2, as April turnarounds restrict domestic supply and strong demand from India and Vietnam limit supply from the Middle East to China. But China PP startups, which are expected to ramp up in earnest in the second half of the year, may cap the rally and lead to significant supply overhang, sources said. Platts Petrochemical Analytics estimate that China's domestic PP production for 2016 would increase 14.4% year on year to 17.9 million mt due to the new startups, while demand is expected to grow significantly slower at 5.4% over the same period to 20.3 million mt. This means net PP deficit is set to narrow to about 2.4 million mt, down more than 40% from 2015, assuming the startups proceed on schedule. PP demand growth is expected to continue to slow down further in the coming years, as China transitions away from an investment-led economy towards a consumer-led economy, Platts Petrochemical Analytics' Hetain Mistry, managing analyst, said during an interview March. PP annual demand growth is forecast to slow to 5% by 2017, then 4.8% by 2018. On the supply side, China is expected to complete up to 3.25 million mt/year of new capacity this year, a third of which will start by late Q2, industry sources said. Coal-to-olefin integrated PP plants, which currently produce the lowest priced material in the domestic market, is expected to make up more than half of this new capacity. Two notable CTO startups include: China Coal Mengda New Energy's 300,000 m tpa plant in Inner Mongolia's Ordos city, Shenhua Group's 300,000 m tpa CTO plant in Xinjiang -- both of which are slated to come online in Q2. Barring delays, industry sources estimate it would take a month or two from start-up to a normal operational rate.