Fire could hamper Petronas polymer exports

Polymer exports from Malaysia's state-owned Petronas are expected to be affected after a second fire in 12 months at its new petrochemical facility in Pengerang.

An explosion and fire occurred at the Pengerang integrated complex at around 10.50pm local time (02:50 GMT) on 15 March. The fire was understood to have affected the refinery's diesel hydrotreater unit but this could not be independently confirmed.

The accident is not expected to significantly impact near-term prices in China as Petronas remains in start-up mode and is not consistently producing large enough volumes to take a toll on the Asian market.

The complex in Johor Bahru, southern Malaysia, is a joint venture between Petronas and Saudi Arabia's state-owned Saudi Aramco, can produce 900,000 t/yr of polypropylene (PP), 400,000 t/yr of high-density polyethylene (HDPE) and 350,000 t/yr of linear low-density polyethylene (LLDPE).

Petronas' subsidiaries currently operate two polymer plants elsewhere in Malaysia — a 255,000 t/y low-density polyethylene (LDPE) plant and a 250,000 t/y LLDPE/HDPE swing plant at Kerteh.

This is the second time in a year that a fire has occurred at the Pengerang site. An explosion had occurred at the refinery's 140,000 b/d atmospheric residue desulphurisation unit on 12 April, and delayed downstream and polymer production for a few months.

Petronas had increased test runs of its polymer units from October, after the explosion in April. The Malaysian producer started exports to key polymer markets in January this year.

Petronas offered unbranded polymer bags to China at limited volumes in mid-January, before the coronavirus outbreak worsened. Petronas in February offered small quantities of PP and LLDPE to Turkey, where a free trade agreement allows it to sell polymers duty free.

The global coronavirus pandemic is adversely impacting demand for petrochemicals in Asia, particularly in China. Converters remained on the sidelines, as last week's declines in crude prices further depressed buying sentiment.

High stock levels in China are another bearish factor. Inventories at Chinese producers Sinopec and PetroChina inched up to 1.27mn t on 11 March from 1.25mn t a week earlier because of low resin consumption.

Argus assessed PP raffia China prices at $840-870/t cfr on 12 March, and LLDPE butene prices at $790-820/t cfr.

There have been significant polymer expansions in southeast Asia in 2019 and 2020, with new production capacity in Indonesia and Vietnam.

Indonesia's Chandra Asri started up production of its 400,000 t/yr LLDPE/HDPE plant at its Cilegon complex in west Java late last year.

South Korean producer Hyosung in February bought propylene for downstream use at its new 300,000 t/yr PP unit in Vietnam's Ba Ria-Vung Tau province.

By Muhamad Fadhil

source: Argus Media