Coronavirus could cut Chinese base chemicals demand by 4 MMt

MOSCOW (MRC) -- Economic disruption surrounding the Wuhan coronavirus outbreak will significantly complicate petrochemical markets, not only cutting into demand globally, but also tightening access in China to feedstock and slowing capital projects, reported Chemweek with reference to Dewey Johnson, vice president/base chemicals at IHS Markit.

He estimates that each 1% decline in China's GDP growth this year will translate into about 2.5 million metric tons/year (MMt/y) of lost base chemicals demand.

Measures to contain the virus have brought large parts of China to a standstill, with quarantines forcing residents to stay home and many companies suspending operations until 10 February and beyond. Assuming the economy remains locked down through the end of February, IHS Markit expects GDP growth in mainland China to be 4.2%, down 1.6% from the original forecast of 5.8%. The result could be 4 MMt of lost base chemicals demand.

China has enormous influence over the global petrochemical market. Home to 33% of the world's 750 MMt/y of petrochemical production capacity, it also accounts for 37% of global demand and about half of annual demand growth.

On a net-equivalent basis, China imports over 60 MMt/y of base chemicals, IHS Markit estimates. Of that, about 24 MMt/y is ethylene, mainly as polyethylene (PE) and ethylene glycol (EG); 15 MMt/y is para-xylene or derivative purified terephthalic acid (PTA); 10 MMt/y is methanol; 10 MMt/y is propylene, mainly as polypropylene (PP); and 7 MMt/y is benzene or derivatives cumene, phenol, styrene, and various intermediates and plastics. Any reduction in imports will create a surplus in the rest of the world, putting prices under pressure.

Within China, the petrochemical industry will face an array of additional challenges, says Johnson. One is feedstock supply. With transportation in China severely curtailed, lower fuel demand will drive down crude oil refining rates, reducing the production of key petrochemical feedstock naphtha. Where will petrochemical producers obtain feedstock? One possibility would be to adjust refinery operations to produce a greater proportion of naphtha. Another would be in increase imports of naphtha and other feedstocks such as liquefied petroleum gases (LPGs) and methanol.

Another consideration is the potential mismatch between production and consumption at different points along the supply chain, which could create surges in inventory growth or depletion. A related issue is the potential for rebounding demand during the second half of 2020.

The coronavirus could also affect the pace of capital investment in China. "There's significant amount of capacity being added today in China," Johnson notes. "Labor may be a key bottleneck in this period, and the question is, how does that affect the (engineering, procurement, and construction) schedules and plant start-ups?"

As MRC informed before, BP said the deadly coronavirus outbreak could cut global oil demand growth by 40 per cent this year, putting pressure on Opec producers and Russia to curb supplies to keep prices in check.

Ethylene and propylene are feedstocks for producing polyethylene (PE) and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 2,093,260 tonnes in 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments rose from both domestic producers and foreign suppliers. The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC

MOSCOW (MRC) -- Chinese propane dehydrogenation (PDH) plants' average operating rate was estimated at around 76% over February 1-5, up from an average of 68% in January, reported S&P Global with reference to a survey by domestic information provider JLC.

However, one source familiar with the matter said China's PDH operating rates could fall to 50% in the coming weeks.

As MRC informed previously, Zhejiang Satellite Petrochemical is running its PDH plant at 70%-80% capacity, sources close to the company told S&P Global, adding it has no plans to increase its run rate unless logistical issues improve. Zhejiang Satellite, located in eastern China, uses around 720,000 mt/year of propane as feedstock when operating at the full capacity of 450,000 mt/year to produce propylene.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC

MOSCOW (MRC) -- Oriental Energy Ningbo said its propane dehydrogenation (PDH) unit had been operating at full capacity this month, reported S&P Global.

At present, this PDH plant's capacity utilisation is at 100%, as the company's polypropylene (PP) production at the same site is mainly manufacturing material used in the production of medical masks and protective clothing.

Located in Zhejiang, China, the PDH unit has a propylene capacity of 600,000 mt/year.

As MRC wrote before, in 2018, Oriental Energy Ningbo restarted its PDH unit following an unplanned outage, in end-September. The unit was shut owing to technical glitch in mid-September, 2018.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC

MOSCOW (MRC) -- Zhejiang Satellite Petrochemical is running its propane dehydrogenation (PDH) plant at 70%-80% capacity, sources close to the company told S&P Global, adding it has no plans to increase its run rate unless logistical issues improve.

Zhejiang Satellite, located in eastern China, uses around 720,000 mt/year of propane as feedstock when operating at the full capacity of 450,000 mt/year to produce propylene.

As MRC reported earlier, Zhejiang Satellite Petrochemical Co. started up a second propylene plant using Honeywell UOP's C3 Oleflex technology at a new petrochemical complex in China in September 2019. The new unit has the capacity to produce 450,000 t/y of polymer-grade propylene. With the first unit, which was started up in late 2014, the company now has a production capacity of 900,000 t/y. Honeywell UOP's C3 Oleflex technology uses catalytic dehydrogenation to convert propane into propylene.

Propylene is the main feedstock for the production of polypropylene (PP).

According to MRC's ScanPlast report, The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).

Zhejiang Satellite Petrochemical Company Limited develops, manufactures and sells acrylic acid esters, methacrylic acids, pigment intermediates, acrylic emulsion polymers, super absorbent polymers, and other acrylic downstream products.
MRC

MOSCOW (MRC) -- ChemOne Group (Singapore), an oil & gas, petrochemicals and natural resources conglomerate, has announced the launch of a USD3.38-billion Pengerang Energy Complex (PEC) in the state of Johor, Malaysia, according to Chemweek.

ChemOne said construction of the project, which it says will be one of the world's largest and most competitive integrated condensate splitters and aromatics production facilities, will start in the second half of 2020 with completion due four years later.

ChemOne is the master developer and majority shareholder through its sponsorship in PEC. Maire Tecnimont is ChemOne's engineering, procurement, construction and commissioning partner for the project, and UOP is the technology provider for PEC. The project is in line with the government's transformation program to increase Malaysia's petrochemical output and establish it as a regional trading hub. At full capacity, expected from 2024, PEC is expected to generate an annual export revenue of USD5 billion for Malaysia. It is expected to serve the Asian markets.

PEC will have a processing capacity of 150,000 b/d of condensate and side feed of naphtha; an aromatics capacity of 2.3 million metric tons/year (MMt/y); oil products output of 3.9 MMt/y and hydrogen of 50,000 metric tons/year. The condensate splitter will produce heavy aromatics naphtha, a primary feedstock for the aromatics plant. The second phase of the development envisages a 300,000 b/d refinery complex to serve regional demand, and with back integrated supply chain to the aromatics complex.

Edwin Seow, a principal at ChemOne, said, "With the petrochemical market set to pick up further, PEC is poised to deliver profitable growth while creating gainful local employment and moving Malaysia further up the value chain in the petrochemical sector."

ChemOne was one of the developers of the Jurong aromatics complex in Singapore, now owned by ExxonMobil. A major refinery and petrochemical project is already nearing completion in Johor. Both are being built by a joint venture of Petronas (Kuala Lumpur) and Saudi Aramco.

As MRC wrote before, ExxonMobil Corp completed maintenance work at its Singapore chemical plant. The company said earlier that the plant was undergoing maintenance, which had caused flaring at the plant. ExxonMobil’s petrochemical complex located on Jurong Island is integrated with its refinery there and produces a range of feedstock and products such as polymers and aromatics.

Besides, we remind that on 12 November, 2019, Exxon Mobil Corp’s Baytown, Texas, chemical plant returned to normal operations after a malfunction in the polypropylene (PP) production area. Exxon’s adjoining 560,500-barrel-per-day (bpd) Baytown refinery was unaffected by a transformer malfunction in the chemical plant.

According to MRC's ScanPlast report, The estimated PP consumption in the Russian market was 1,260,400 tonnes in January-December 2019, up by 4% year on year. Supply of almost all grades of propylene polymers increased, except for statistical copolymers of propylene (PP random copolymers).
MRC