Two new petrochemical plants are coming online in India

Two multi-billion-dollar petrochemical plants are coming online in India in coming months at a time of weaker-than-expected demand, setting the stage for fierce price competition domestically and internationally, industry officials and analysts say, said Hydrocarbonprocessing.

Several regions, including India, China and the Middle East have been developing petrochemical production to provide a tailwind to decades of oil refining as the world looks to switch to cleaner energy sources. While producers remain bullish longer term, largely off the back of economic growth in India and China, the splurge in new capacity is weighing on markets near term.

Both China and India are grappling with excess supplies of ethylene and propylene, a key feedstock to produce petrochemicals including polyethylene (PE) and polypropylene (PP) – the basis for making plastic -- given a slowdown in global economic growth.

So fresh production capacity in India is set to add to the pressure on prices. Russia-backed Indian refiner Nayara Energy is commissioning a 450,000 ton per year (tpy) polypropylene plant in western India in the first quarter of 2024, said a company source, who declined to be identified because he was not authorized to speak to the media. The company's communication office did not respond immediately to a request for comment.

HPCL plans to start a 9 million tpy refinery and petrochemical project in the northwestern state of Rajasthan by January.

Earlier this year, HPCL-Mittal Energy Ltd (HMEL), a joint venture between state-run Hindustan Petroleum Corp Ltd and Mittal Energy Investment, started a 1.2 million tpy petrochemical cracker in Punjab, northern India.

An industry official at a newly commissioned petrochemical cracker said the new production capacity was coming online when stocks were already building.

"Products are not clearing at a steady pace locally," he said. He declined to be identified because he was not authorized to speak to the media.

India's ethylene surplus is set to more than double to 11.2 million metric tons in the fiscal year to March 2024, a Reuters calculation based on data and forecasts from Chemicals & Petrochemicals Manufacturers' Association showed. A propylene surplus is expected to grow 63% to 18.67 million tons, according to the calculations.

The increasing supplies are weighing on both PE and PP prices. Refiners have been suffering losses since September with PE and PP margins at $150 per ton, below breakeven costs of about $300-$350 per ton for standalone plants, an official at a large petrochemical producer said, declining to be identified.

CEO of Haldia Petrochemicals Ltd, Navanit Narayan, told Reuters a slower-than-expected recovery in Chinese demand following the COVID pandemic, just as new supplies come into the market, had been a major factor weighing on prices.

"While demand remained subdued, several new plants were commissioned in Asia, mainly in China and India," he said. Industry officials said they expected prices to remain subdued in 2024 and there were few export options, given ample supply elsewhere. That may leave markets closer to home, such as Kazakhstan, as the best in a bad set of export options, they said.

"A price war is definitely on the anvil," said an official at an Indian petrochemical producer, who declined to be identified in the absence of authorization to speak to the media. Looking further ahead, research firm Wood Mackenzie sees little prospect of a more balanced global market in coming years.

It forecasts ethylene and propylene demand will rise 29% to 426.8 million tons by 2030 from 2023 levels, while production capacity is expected to increase 25% to 485.9 million tons, leaving a supply surplus of around 60 million tons.

We remind, Lummus Technology, a global provider of process technologies and value-driven energy solutions, and Citroniq Chemicals announced that the two companies have signed licensing and engineering agreements for green polypropylene plants in the U.S.

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As previously announced and recognized in the third quarter on a confidential basis, Fluor Corporation was awarded two contracts from Dow for the construction of the world’s first net-zero scope 1 and 2 emissions integrated ethylene cracker and derivatives complex in Fort Saskatchewan, Alberta, Canada, said Hydrocarbonprocessing.

The reimbursable services contracts represent a total value of more than $3 billion and consist of engineering, procurement and construction management for a new ethylene cracker unit and for the associated utilities, power and infrastructure facilities. The overall program also includes the expansion and retrofit of Dow’s existing manufacturing facilities.

Dow announced in November that its board of directors declared the Final Investment Decision for the project, which is part of Dow’s Path2Zero program, intended to lower the greenhouse gas emissions of its manufacturing facilities while growing capacity and delivering low-emissions products to customers.

“This program represents a major step towards Dow’s commitment to decarbonize its global footprint,” said Jim Breuer, group president of Fluor’s Energy Solutions business segment. “We have a long history of successful project execution with Dow, and we are grateful to be given the opportunity to support their objective to be a leader in sustainable chemicals production.”

Dow’s net-zero scope 1 and 2 emissions integrated ethylene cracker and derivatives complex is projected to decarbonize approximately 20% of the company’s global ethylene capacity while growing its polyethylene capacity by approximately two million metric tons per annum.

“Fluor has been a great partner over decades and this project builds on Dow’s very successful Texas-9 and associated projects, delivering more than 15% return on invested capital since its 2017 start-up,” said Ron Huijsmans, Dow’s Global MEGA Project Director. “We are excited to have Fluor on board again to deliver a similar or even better project outcome.”

In February, Fluor was awarded the front-end engineering and design contract for the project. Construction began in July on early works and the program is expected to come online in phases, with the first phase starting up in 2027 and the second phase starting up in 2029.

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Spanish oil company Repsol said it has started supplying SAF to U.S.-based airline Atlas Air, which ships freight for Zara-owner Inditex to and from Zaragoza airport in northern Spain, said the company.

Atlas Air has been using SAF for 5% of fuel on all its flights from Zaragoza since November and is the first cargo airline to use green jet fuel regularly in Spain, Repsol and the airline said in a joint statement. Regulators in Europe and the United States are pushing for the use of sustainable aviation fuel, made out of organic waste such as used cooking oil, as it is one of the only ways to decarbonize air travel. However, the supply and cost of SAF limit its use in commercial air transport.

In May, Repsol clinched an agreement with another low-cost airline, Ryanair, to supply up to 155,000 tons of SAF between 2025 and 2030.

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South Korean exports rose in October for the first time in 13 months as semiconductors, the country’s top export item, are on course to regain momentum, raising hopes for a faster recovery in Asia’s fourth-largest economy, said Kedglobal.

Overseas sales grew 5.1% to $55.1 billion last month from a year earlier, marking the first year-on-year growth since September 2022, showed data from the Ministry of Trade, Industry and Energy on Wednesday. Imports lost 9.7% on-year to $53.5 billion, resulting in a trade surplus of $1.6 billion.

“Exports are expected to lead the economic growth from now on,” Minister of Trade, Industry and Energy Bang Moon Kyu said in a statement.

The country reported an export drop in September for the 12th straight month, adding to concerns that the economy may miss the central bank’s growth target of 1.4% for this year. The economy expanded 0.6% in the third quarter from the previous three months on a seasonally adjusted basis, according to the Bank of Korea’s advance estimates last month.

Concerns have eased as October exports rebounded amid signs that overseas sales of semiconductors are poised to recover in the near term.

We remind, South Korea may snap its 12-month-long losing streak in exports this month after it reported an on-year gain in exports in the first 20 days of October despite fewer working days thanks to brisk sales of its cars and ships abroad.

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Sumitomo Chemical has decided to close down its production facilities for cyclohexanone (also known as anone) at its Ehime Works located in Niihama City, Ehime, Japan and exit the business, said the company.

The closure of the production facilities is scheduled for the end of March 2024. Cyclohexanone is mainly used as an intermediate for nylon. Demand for cyclohexanone was expected to remain solid both in Japan and overseas, but there have recently been significant changes in the business environment, such as soaring raw material prices and a depressed market resulting from the slow recovery of the global economy.

In view of these developments, Sumitomo Chemical has determined that it would be difficult to realize stable sales volume or margins for cyclohexanone over the medium- to long-term.

Sumitomo Chemical is implementing short-term intensive performance improvement measures and, as part of these efforts, is accelerating the restructuring of its businesses from the perspective of profitability and the best-owner principle. The Company will steadily advance these measures to ensure a V-shaped recovery in fiscal 2024, while also strengthening its financial position to carry out fundamental structural reforms going forward.

Earlier it was reported, Sumitomo Chemical announced its decision to close down its production facilities for caprolactam, a raw material for nylon, at its Ehime Works (Niihama city, Ehime, Japan) in October 2022, and exit the business.

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