News

Asian petrochemical markets face greater impact from pandemic than BP’s $5 bil asset sale to Ineos

Asian petrochemicals markets will be largely unaffected by BP’s $5 billion sale of its entire aromatics and acetyls manufacturing business to Ineos, market sources said .

participants in the Asian paraxylene, purified terephthalic acid, acetic acid and PET markets said they were more focused on the current supply-demand outlook than this week’s $5 billion sale announcement as they grappled with high inventories and weak demand recovery, and concerns that buying appetite and confidence may have been altered by the COVID-19 lockdowns in multiple countries.

Production margins were hovering at multi-year lows in early July as oversupply continues to pressure the polyester chain. The PX-naphtha spread stood at $150.125/mt July 2 after hitting a record low $146/mt the day before, while the PTA/PX spread was calculated at $80.90/mt July 2, below the typical breakeven level of $85-$120/mt, S&P Global Platts data showed.

UK-based petrochemical giant Ineos will acquire all of BP’s petrochemicals business in Asia, the US and Europe, which last year produced 9.7 million mt of products, BP announced June 29.

BP’s PTA assets in Asia include a 2.35 million mt/year facility at Zhuhai in China, 540,000 mt/year plant at Merak in Indonesia and 760,000 mt/year plant at Taichung in Taiwan.
AA OPTIONS

While BP’s decision to divest its Asian AA business to Ineos will likely have minimal impact on the market in the short term, the long-term impact for will hinge on which of BP’s petrochemical businesses Ineos focues on, which for the moment is unclear, sources said.

“In Asia, there is an understanding among producers, even though they are competitors, to take turns shutting down their plants when prices get too low,” an end-user said. “It’s unclear whether Ineos will do the same… they may just want to maximize sales.”

Other market participants said there was also potential for joint ventures with Ineos to open up opportunities. Ineos, because of its unfamiliarity with the AA market in Asia, could opt to let a local JV partner market and export AA, sources said.

BP’s AA assets in Asia include the 420,000 mt/year Yangtze River Acetyls Co. and BP YPC Acetyls Company’s 500,000 mt/year plants in China, Formosa BP Chemicals Corporation’s 300,000 mt/year plant in Taiwan, BP Petronas Acetyls’ 500,000 mt/year plant in Malaysia and Lotte BP’s 650,000 mt/year AA and 400,000 mt/year VAM plants in South Korea.

BP and China’s Zhejiang Petroleum and Chemical Corporation also signed a memorandum of understanding last October to build and operate a new 1 million mt/year AA plant in Zhoushan in China. The status of the equally-owned JV is currently unclear.

Global supply of AA, which is used in paints, adhesives and packaging, has lengthened during the coronavirus pandemic, with demand from the automotive sector in particular falling as vehicle production and sales decline.

Chinese AA prices are at multi-year lows, with the benchmark FOB China down 67% from its peak at $810/mt in June two years ago at $265/mt July 2, Platts data showed. China is the world’s largest AA market and accounts for more than half of global production capacity.

BP’s Singapore petrochemicals trading team is currently operating on a business as usual basis, a market source said.

Donate

Support KOGC
Available for everyone, funded by readers
Contribute

Related Articles

4 Comments

  1. I like the helpful info you provide in your articles. I will bookmark your weblog and check again here frequently. Im quite certain I’ll learn many new stuff right here! Best of luck for the next!

  2. I had this content bookmarked some time ago but my notebook crashed. I have since gotten a new one and it took me a while to locate this! I also really like the template though.

  3. I wanted to check up and allow you to know how , a great deal I cherished discovering this blog today. We would consider it a honor to work at my company and be able to make real use of the tips contributed on your blog and also participate in visitors remarks like this. Should a position regarding guest author become available at your end, remember to let me know.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button