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Basic Materials
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Market Cap £2.29bn
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Asia petchem makers maintain run cuts amid weak China demand, oil price uncertainty

Mon 9th March, 2020 6:09am
* Most petchem makers stick to run cuts for 3rd straight
month 
    * Formosa, Asia's top naphtha importer, joins cuts
    * Dive in crude oil prices adds to questionmarks

    By Seng Li Peng and Jane Chung
    SINGAPORE, March 9 (Reuters) - Even after an explosion idled
a massive Asian petrochemicals complex, most petchem makers in
the region won't up output from current low levels because
sluggish demand from China will mean there is no supply gap,
industry sources said on Monday.
    While feedstock prices have dropped from January highs that
prompted many Asia petchem producers to cut production runs,
they said the combined impact of lower inputs and a six-month
outage at the giant South Korean plant hit by the blast still
won't be enough to stoke an uptick in production.
    That's because China, the biggest petchem consumer in the
region, is only now beginning its recovery from the economic
shutdown caused by the coronavirus epidemic, while growth in the
world's number 2 economy was already comparatively sluggish. 
    "Downstream product and cracker margins are still weak, and
with the key Chinese market starting to show some signs of
recovery in March ... the overall demand situation is still
unclear for the time being," said Energy Aspects analyst Aaron
Cheong. 
    "Time will also be needed to work down the high inventory
levels which were built up over the last month," he added.
    The restrained mood in the industry comes after South
Korea's Lotte Chemical  011170.KS  shut its 1.1 million tonnes
per year (tpy) cracking complex in Daesan, on March 4 after an
explosion and it could down for six months.  urn:newsml:reuters.com:*:nL4N2AX023
    The complex is the fifth-largest cracking unit in South
Korea, and one of the biggest in all of Asia, based on Reuters
data.  O/ACRACKER  
    Petrochemical makers that cut output runs in January include
South Korea's KPIC, Japan's JXTG Nippon Oil & Energy Corp,
Maruzen  5982.T  and Showa Denko  4004.T , Indonesia's Chandra
Asri  TPIA.JK , Singapore's PCS and Malaysia's Titan. 
    Titan and JXTG, however, are among some of the crackers that
have scheduled maintenance this month while PCS and Showa Denko
have restored cracker runs to nearly full tilt and maximum mode
respectively this month, industry sources said. 
    But South Korea's LG Chem  051910.KS  has decided this month
to cut its runs to 95%, a company spokesman said.
    Taiwan's Formosa  6505.TW , also Asia's top naphtha
importer, has also joined the bandwagon by cutting runs this
month.  urn:newsml:reuters.com:*:nL4N2AZ22E
    Adding to the uncertainty for the petchem sector on Monday
was the near-30% crash in crude oil prices sparked by a price
war between Saudi and Russia.  urn:newsml:reuters.com:*:nL1N2B10DB
    "This (the dive in oil prices), in my opinion, is the start
of a recession," said one industry source who tracks
petrochemicals, declining to be identified because he's not
authorised to speak to the media.

 (Reporting by Seng Li Peng in Singapore and Jane Chung in
Seoul; Editing by Kenneth Maxwell)
 ((lipeng.seng@thomsonreuters.com; +65 6870 3086; Reuters
Messaging: lipeng.seng.thomsonreuters.com@reuters.net))
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