Asia Pacific Update: March 18
In today’s edition
In today’s edition, we look at the current state of Asia Pacific’s petrochemicals industry; currently negotiating recovery, unforeseen weather events, and pressures from brands and governments around climate change and carbon emissions.
If you’d like to talk to us about any of these issues or how you can manage issues and prepare recovery plans, please reach out to us here email@example.com.
If you have received this bulletin from a friend or colleague, you can easily subscribe here.
Recovery Spotlight: petrochemicals
A reversal is underway in the oil sector, with crude prices, demand, industry equities, and sentiment all rising. Coming a year after the Saudi-Russian price war, and the worst crash in oil prices in decades triggered by the pandemic, the resurgence is said to be a telling reminder that the world’s hunger for fossil fuels remains strong.
Supply and demand
Fallout from the Arctic blast that shut down America‘s major refineries has been felt in Asia, where plastics makers are facing surging prices for key materials. There are concerns that the US will be unable to supply Asia with the requisite 2.5 million tons of naphtha needed by the region for March and for April. As a result, Asian plastics makers are facing higher costs. The region’s producers of fuels such as gasoline, however, are benefiting from the refinery shutdowns in the US.
Asian exporters are currently looking to Australia for opportunities as the shutdown of almost all the country’s refineries creates a bright demand spot. Industry experts believe China may be in the best position to take advantage of the opportunity, ahead of the current top suppliers Singapore and South Korea.
Vietnam’s polypropylene supplies are expected to remain tight in March because of reduced domestic production and tightening import availability due to a supply issue and shutdown of its Nghi Son Refinery in mid-February. South Korean and Thai producers in Vietnam are also operating at reduced rates.
The industry continues to negotiate pressures around climate change, with some major petrochemical brands already having committed to carbon-neutrality by 2050.
A new analysis by the UN has concluded that many countries have not made sufficient commitments to reduce carbon emissions to sufficiently prevent catastrophic climate change outcomes; with current measures likely to only achieve a reduction of 1% of emissions, compared to 2010 levels, instead of the necessary 50% outlined by the global scientific community.
As a result, many brands and nations are escalating their commitments to reducing carbon emissions and dependence on petrochemical materials. One of the world’s largest consumer tech and smartphone brands has just announced that, by 2030, its entire business model will be carbon neutral. In Australia, one of the country’s two largest retail chains is hoping to invest in up to twenty circular-recycling soft plastic processing factories, which will reuse existing food packaging for new products.
Australia’s government, meanwhile, has just brought forward its National Plastics Plan from 2025 to 2022. Policies included in the plan include banning polystyrene (or EPS foam), implementing stricter definitions on ‘biodegradable’ plastics, and making 70% of plastic products in the country ‘recoverable’ – all of which will impact petrochemical manufacture and sales in Asia.
Plant maintenance or closures
A number of plants in the Asia Pacific region are undergoing maintenance as refinery closures take centre stage.
Shell will halve the crude processing capacity at its Pulau Bukom refinery in Singapore as part of an initiative to reduce its CO2 emissions to net zero by 2050.
Pilipinas Shell Petroleum Corp. plans to shut its Tabangao refinery in the Philippines and transform the facility into an import terminal, the company said in a statement. The refinery has been shut since May 2020, having been idled due to weak demand for domestic products.
Ampol is conducting a review of the Lytton refinery in Australia, to be completed by mid-2021. The company said it is considering all options for “the facility’s operations and the connected supply chains and markets it serves”, including possible closure or permanent transition to an import model.
A number of oil refineries in India, by contrast, have recently begun operating at close to pre-COVID rates of production, even as experts predict additional plant closures throughout the region.
About COVID-19 Recovery Report:
- The views and opinions reflected by these headlines do not necessarily represent those of Weber Shandwiick.
- The content of this news bulletin is a summary of publicly available news articles on events and developments related to COVID-19