The volatile market of polyolefins in Asia is enjoying the calm before the storm. Relatively few plant openings this year and the next will render a quiet albeit dynamic period until 2009, when large-scale projects in China and the Middle East begin operating.
``2009 will see an abundance of polyolefins capacity,'' said Andrew Ho at the World Petrochemical Conference, held by Chemical Market Associates Inc. in Houston. Ho is CMAI's polyolefins director-Asia, based in Singapore.
Asia is bracing for the next wave of capacity expansion in 2009. That includes 11.5 billion-pound nameplate capacity of polyethylene and 8.7 billion-pound capacity of polypropylene. China alone will start six plants with a total capacity of 8.6 billion pounds of PE and 5.5 billion pounds of PP.
India, an increasingly important player in the region, also is adding a 1.1 billion-pound PE project and 2.9 billion pounds of PP capacity that year.
In comparison, only one PE plant will start production this year in Asia - located at Maoming - with annual capacity of 5.5 million pounds. No PE capacity additions are scheduled for 2008. For PP, China will add 1.8 billion pounds of capacity and South Korea 1.2 billion pounds during 2007 and 2008.
The substantial capacity of China's upcoming projects has changed the definition of ``world-scale,'' Ho said.
Plant operating rates in Asia will stay high throughout 2008, especially in China. In the rest of Asia, resin producers will maintain high operating rates to meet domestic demand growth as well as exports especially to China.
Meantime, demand growth for polyolefins in Asia is forecast at around 7 percent annually in the next five years, largely driven by China with vast market size and strong gross domestic product growth nearing 10 percent through 2011. Newly emerged forces such as India and Vietnam also will contribute to the demand.
Asia's thirst for polyolefins is not yet quenched, but self-sufficiency varies from country to country. China, the major consumer of polyolefins in Asia, has been and will remain deficient in PE.
``Based on demand growth projections, China will continue to have significant PE imports,'' Ho said. However, as China adds capacity over the next few years, China's net imports of PE will fluctuate around a base of about 11 billion pounds. The same story will hold true for PP, as China's net imports of PP are projected to be more than 4.4 billion pounds a year through 2011.
For Asian countries that export polyolefins, including South Korea, Taiwan and India among others, China's import demands are vital to their business.
The Middle East will have a cost advantage in raw materials, but Asian suppliers already have established a strong foothold in China, and ``they will defend their market share,'' he said.