SINGAPORE--A massive shutdown of China s petrochemical industry is slated to begin on 1 August on insufficient electricity due to the upcoming Beijing Olympics, said sellers and buyers on Friday.
The power grids in host cities such as Beijing, Qingdao and Shanghai have to cope with additional demand for the sporting extravaganza and this has resulted in warnings from Chinese power suppliers that they could resort to cutting power to industrial areas if required.
"What s good for China may not be good for the ordinary citizens. We re already struggling with lousy margins due to poor export orders and the lull season so this power shortage due to the Olympics will only serve to disrupt our operations even further," said an executive from a Chinese polyester fibre and yarn maker in Mandarin.
"We have in-situ power generators but they run on coal and gas. Both of these fuels are very expensive due to spiralling transportation costs," added the executive whose company is based in Fujian, southern China.
Chinese polyester makers, who were operating at 60% capacity in July on poor sales-to-output ratios, said that they would stop production for 10 to 20 working days and focus on selling inventories in August.
China s unsaturated polyester resins (UPR) makers also expressed similar sentiments, with some players expressing fears that this could result in a potential shake-up for their sector.
"Around 70% of the UPR factories in east and south China were closed from mid-July due to poor economics. The remaining plants will have to shut due to a lack of power so there goes the domestic UPR industry in August," said a southern China-based diethylene glycol (DEG) trader in Mandarin.
"Even after August, demand for UPR products may be poor because the current global economic decline could impact export orders from markets such as the US and Europe. If the situation doesn t get better by the fourth quarter of 2008, the smaller makers could exit the market via buy-outs by larger producers or declaring insolvency," the trader added.
Tight electricity supplies have already hit producers in the energy-intensive chlor-alkali industry with some plants running at only 50% capacity. Output of calcium carbide, a key feedstock for carbide-based polyvinyl chloride (PVC), has dropped by 50% in recent weeks due to a shortage of electricity, said producers in Shanxi, north China.
When contacted by ICIS news, a spokeswoman from the Beijing Olympic Games organising committee said in Mandarin: "What power cuts? We re not aware of any electricity shortage due to the Olympics."
Qingdao Power Supply Company however said it would not rule out the possibility of shutting down some high energy-consuming companies including some chemical plants in the event of a power shortage. Beijing s main electricity provider, the Beijing Power Supply Company declined comment.
Qingdao is slated to host the Olympic sailing competitions while most other events will take place in Beijing.
Some petrochemical sectors were spared the power cuts with operations at styrene monomer (SM) plants in eastern China unlikely to be affected by power diversions due to the Games, market participants say.
"Power shortages in eastern China are perennial problems here, even without the Olympics," said a producer. However, SM producers were not expecting any extra cutbacks related to the Games.
The power cuts are the latest in a series of measures imposed by the Chinese government to ensure the success of the Beijing Games.
The power grids in host cities such as Beijing, Qingdao and Shanghai have to cope with additional demand for the sporting extravaganza and this has resulted in warnings from Chinese power suppliers that they could resort to cutting power to industrial areas if required.
"What s good for China may not be good for the ordinary citizens. We re already struggling with lousy margins due to poor export orders and the lull season so this power shortage due to the Olympics will only serve to disrupt our operations even further," said an executive from a Chinese polyester fibre and yarn maker in Mandarin.
"We have in-situ power generators but they run on coal and gas. Both of these fuels are very expensive due to spiralling transportation costs," added the executive whose company is based in Fujian, southern China.
Chinese polyester makers, who were operating at 60% capacity in July on poor sales-to-output ratios, said that they would stop production for 10 to 20 working days and focus on selling inventories in August.
China s unsaturated polyester resins (UPR) makers also expressed similar sentiments, with some players expressing fears that this could result in a potential shake-up for their sector.
"Around 70% of the UPR factories in east and south China were closed from mid-July due to poor economics. The remaining plants will have to shut due to a lack of power so there goes the domestic UPR industry in August," said a southern China-based diethylene glycol (DEG) trader in Mandarin.
"Even after August, demand for UPR products may be poor because the current global economic decline could impact export orders from markets such as the US and Europe. If the situation doesn t get better by the fourth quarter of 2008, the smaller makers could exit the market via buy-outs by larger producers or declaring insolvency," the trader added.
Tight electricity supplies have already hit producers in the energy-intensive chlor-alkali industry with some plants running at only 50% capacity. Output of calcium carbide, a key feedstock for carbide-based polyvinyl chloride (PVC), has dropped by 50% in recent weeks due to a shortage of electricity, said producers in Shanxi, north China.
When contacted by ICIS news, a spokeswoman from the Beijing Olympic Games organising committee said in Mandarin: "What power cuts? We re not aware of any electricity shortage due to the Olympics."
Qingdao Power Supply Company however said it would not rule out the possibility of shutting down some high energy-consuming companies including some chemical plants in the event of a power shortage. Beijing s main electricity provider, the Beijing Power Supply Company declined comment.
Qingdao is slated to host the Olympic sailing competitions while most other events will take place in Beijing.
Some petrochemical sectors were spared the power cuts with operations at styrene monomer (SM) plants in eastern China unlikely to be affected by power diversions due to the Games, market participants say.
"Power shortages in eastern China are perennial problems here, even without the Olympics," said a producer. However, SM producers were not expecting any extra cutbacks related to the Games.
The power cuts are the latest in a series of measures imposed by the Chinese government to ensure the success of the Beijing Games.
