Profits from making petrochemicals in Asia have plunged to their lowest in month...
SINGAPORE/SEOUL - Profits from making petrochemicals in Asia have plunged to their lowest in months as the unrelenting trade conflict between Beijing and Washington stifles Chinese demand for chemicals and plastics just as waves of new production start to come on line.
That comes as new production is set to crank up in China, South Korea and Malaysia, although the United States and the Middle East will account for more than half of the new volumes. The spread between prices for polyethylene and feedstock naphtha gives an approximation of how much profit petrochemical makers can make.
“The average LLDPE/naphtha spread for July was around $418 a ton and could fall below producer break-even levels of around $400 to $450 in 2020 due to long supplies,” said Tan Yi Ling, principal analyst of polyolefins at IHS Markit based in Singapore. In January the spread was about $542, Tan said.The year-long, tit-for-tat trade dispute between Washington and Beijing has roiled financial markets and cast a long shadow over the global economy.
Shin Hak Cheol, chief executive of South Korea’s LG Chem , told reporters in July that South Korea’s top chemical maker plans to tap markets in areas such as Southeast Asia to offset easing demand from plastics makers in China.“Additionally, South Korean petrochemical makers expanded their facilities five years ago during a peak time in the petrochemical cycle, and some of those increased supplies have hit the market and will keep coming to the market in 2020.
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