Rising competition is forcing Asian plastics manufacturers to curb production

Rising competition is forcing Asian plastics manufacturers to curb production

Some of Asia’s greatest makers of the building blocks used to make plastic are cutting processing rates after a powerful development of capacity last year prompted rising feedstock expenses and debilitating overall revenues. Yield has surged, while oil-based naphtha has become more costly because of expanded interest and the increasing expense of crude. That is joined to drive benefits from changing naphtha over to ethylene to the least since July. Ethylene cracker operators including Taiwan’s Formosa Petrochemical Corp. furthermore South Korea’s LG Chem Ltd. reacted by trimming processing, said brokers and an analyst.

Asia’s total steam cracking capacity rose by about 20% in 2021, according to FGE, with LG Chem among processors expanding operations. Rising naphtha costs have also prompted some companies to seek liquefied natural gas as a substitute feedstock. LPG is typically used more frequently outside of the winter months, when heating demand eases.

“We expect cracker margins to remain fairly weak through January as downstream demand, especially in China, will be muted with the Lunar New Year approaching,” said Jeslyn Chua, a lead analyst at industry consultant FGE. “Ethylene supply in Asia has increased due to capacity additions.”

South Korea’s Hanwha Total bought LPG cargoes for January and February delivery for cracking, FGE’s Chua said. A trader confirmed the purchases. A spokesman for the company didn’t respond to an email seeking comment.

LG Chem cut processing rates at all of its crackers and is currently operating at about 80% capacity, while Formosa is running its plant at 90% to 95%, three traders said. The companies didn’t respond to emails seeking comment.

China’s Sinopec Zhenhai Refining & Chemical Co. started its 1.2-million tons a year cracker at Ningbo late last year, while South Korea’s Hyundai Chemical Co. ramped up output at its new 750,000-tons a year cracker in December, according to FGE. Earlier last year, South Korea’s GS Caltex Corp. and LG Chem added a combined 1.55 million tons.

Check the latest news about business news section for best information.

The best source of news - newszf.com
Compare items
  • Total (0)