Volume 3, issue #14 - 08-05-1998

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Growing unease for Asian petchem industry

Mar. 24, 1998 The president of the Petrochemical Corporation of Singapore (PCS), Takayuki Okada, and the president The Polyolefin Company (TPC), Noriyasu Kagawa, recently met to discuss petrochemical demand trends and the status of facility operations in Southeast Asia.
The companies, having enlarged their respective facilities and expanded sales, are currently maintaining full-capacity operations, yet their leaders expressed feelings of growing unease regarding what lies ahead.
Addressing polyolefin demand trends in various Asian countries, Kagawa said that demand "seemingly has dropped to 20 % of ordinary levels in Indonesia, and to one-third of normal in Thailand. In the Philippines, the impact was light only where industrialisation lagged. Still, demand has plunged to less than 50 % of normal. In Malaysia, on the other hand, I would say the situation is comparatively good."
Market prices (CIF) in the region have fallen to $ 510-540 per ton for polypropylene homopolymer, $ 750/t for LDPE, and $630-660/t for linear-LDPE, representing "a 30 %-plus drop compared to the same period one year ago."
Although PP was the first to be hit by a price softening, "The supply and demand situation has improved because neighbouring non-integrated makers had to trim operating rates."
One worrisome element for PE is the completion of facilities expansion in the Middle East. "The impact of the (Middle East) offensive is being felt in Southeast Asia. The situation is worse than with PP" said Mr. Kagawa.
Kagawa added that because nearly 40 % of TPC's sales are to China, conditions "could be described as firm right now." With a view toward enlarging sales channels, "Countries which have been left out up to now, such as Myanmar and Bangladesh, have felt little effect from the currency crisis. We hope to expand our sales there. Moreover, we have started selling to Eastern European and Middle Eastern markets thanks to lower freight charges."
PCS's Okada next spoke about business performance. "Naphtha prices have fallen. As a result, we are operating in the black, although not at the level initially anticipated. Also, we are competitive because we completed facilities expansion before the market downturn."
In contrast to Okada's confidence, Kagawa had this to say: "TPC has been directly hit by the downturn in selling prices, making a downward revision unavoidable."