Latest market news

Analysis: Vietnam emerges as polymer hub amid trade war

  • : Petrochemicals
  • 19/10/07

Vietnam is positioning itself as southeast Asia's top polymer hub as it indirectly benefits from the US-China trade war.

The trade war has created two positive spillovers for Vietnam, through the increased availability of cheaper US-origin cargoes and the emergence of new conversion investment from China.

Vietnam is a key importer of polymers, with estimated imports of 5.59mn t/yr of polyethylene (PE), polypropylene (PP), polyethylene terephthalate (PET) and polyvinyl chloride (PVC) in 2018, according to the Vietnam Plastics Association (VPA).

PE imports totalled 1.73mn t/yr, while PP imports were at 1.34mn t/yr last year, the VPA data show.

Vietnam's imports typically come from the Middle East, South Korea and Association of Southeast Asian Nations (Asean) member countries such as Thailand, Malaysia and Singapore.

But the emergence of US PE supply is adding new flows. More resins from the US that were originally bound for China are instead expected to make their way to Vietnam, especially given the country's attractive import duty structure.

US producers are steering clear of China because of restrictive duties placed on most polymers. The tariff rate on some US imports from China, including certain polymer grades, is scheduled to rise to 30pc from 25pc on 15 October.

By contrast, Vietnam has set its import duty at zero for PE and at 3pc for PP from most origins outside southeast Asia. Asean countries are exempt from duties when selling PP to Vietnam.

Import reliance

Vietnam does not have any existing PE production, making it highly dependent on imports. The country imports around 70pc of its domestic PP requirements.

Nghi Son Refinery and Petrochemicals (NSRP) produces 370,000 t/yr of PP, while Binh Son Refining and Petrochemical (BSR) operates a 150,000 t/yr PP unit, according to Argus data.

Most PE and PP is sold to Vietnam directly by producers or by international traders with distribution channels in the country. Global polymer traders such as Vinmar and Tricon have started to export US-origin PE from Houston into Vietnam and other Asean nations in their own branded bags in recent months.

Shipment timings from the US to Vietnam vary from two to three months, depending on occasional port congestion in Houston. Asean-origin material benefits from shorter transit routes, ranging from a few days to two weeks.

The largest polymer distributor in Vietnam by far is OPEC Plastics, thanks to its significant distribution channels across the country for PE, PP, polystyrene (PS), ethylene vinyl acetate (EVA), PVC and PET. OPEC Plastics, which also exports PE out of Houston, has an international presence in Asean, China, Russia and the Middle East.

Chinese investment

The Vietnamese polymer industry is increasingly attracting newer investments from Chinese convertors, which are shifting their factories to the country to circumvent restrictive tariffs on US-origin PE. Taiwan's Formosa Plastics, South Africa's Sasol and global producers ExxonMobil and Lyondellbasell are among the companies that have added new PE capacity in the US this year. The absence of extensive China distribution has helped drive Vietnam's fast emergence as a key outlet in Asia for these newer US capacities.

The wave of relocations of Chinese convertors to Vietnam has happened relatively quickly, with only slightly more than a year having elapsed since the trade war first escalated. The investments in Vietnam also come as China is forging ahead with its Belt and Road initiative to expand its international investments in southeast and central Asia.

Three out of 10 new convertor units in Vietnam have now been bought by polymer factories with Chinese owners, a major machinery manufacturer said.

Chinese convertors with a presence in Vietnam have had to act quickly to preserve their businesses, which have already been hit by sluggish domestic growth in downstream sectors such as automotive and packaging in China.

High-level US-China talks will resume this week in Washington, but prospects for a deal that would resolve the trade war between the two countries remain remote.

Vietnam-EU FTA

The new Vietnamese factories, most of which are Chinese-owned, are not just expected to benefit from buying cheaper PE resins from the US but will also soon be able to sell finished products to Europe at preferential duty rates.

The EU and Vietnam signed a free-trade agreement (FTA) in June that will progressively eliminate nearly all customs duties on goods traded between the two sides. The FTA is likely to be formally ratified later this year.

Vietnam may also emerge as an alternative export destination for newer Chinese PP resin producers. Guangxi Petrochemical and Sinopec Beihai operate polymer units in Guangxi, close to the China-Vietnam border.

Vietnam will add to its existing PP capacity and introduce PE production for the first time in the coming years. South Korean textiles and chemicals maker Hyosung will start a new petrochemical complex in Vietnam's Ba Ria-Vung Tau province early next year. Its new 300,000 t/yr PP unit is scheduled to come on stream in the coming months.

In the longer term, Long Son Petrochemicals, majority owned by Thailand's SCG, is scheduled to start up a new 450,000 t/yr PP unit and 1mn t/y PE plant in 2024 in Vietnam's Vung Tau, Argus data show.


Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

24/11/04

US railroad-labor contract talks heat up

US railroad-labor contract talks heat up

Washington, 4 November (Argus) — Negotiations to amend US rail labor contracts are becoming increasingly complicated as railroads split on negotiating tactics, potentially stalling operations at some carriers. The multiple negotiating pathways are reigniting fears of 2022, when some unions agreed to new contracts and others were on the verge of striking before President Joe Biden ordered them back to work . Shippers feared freight delays if strikes occurred. This round, two railroads are independently negotiating with unions. Most of the Class I railroads have traditionally used the National Carriers' Conference Committee to jointly negotiate contracts with the nation's largest labor unions. Eastern railroad CSX has already reached agreements with labor unions representing 17 job categories, which combined represent nearly 60pc of its unionized workforce. "This is the right approach for CSX," chief executive Joe Hinrichs said last month. Getting the national agreements on wages and benefits done will then let CSX work with employees on efficiency, safety and other issues, he said. Western carrier Union Pacific is taking a similar path. "We look forward to negotiating a deal that improves operating efficiency, helps provide the service we sold to our customers" and enables the railroad to thrive, it said. Some talks may be tough. The Brotherhood of Locomotive Engineers and Trainmen (BLET) and Union Pacific are in court over their most recent agreement. But BLET is meeting with Union Pacific chief executive Jim Vena next week, and with CSX officials the following week. Traditional group negotiation is also proceeding. BNSF, Norfolk Southern and the US arm of Canadian National last week initiated talks under the National Carriers' Conference Committee to amend existing contracts with 12 unions. Under the Railway Labor Act, rail labor contracts do not expire, a regulation designed to keep freight moving. But if railroads and unions again go months without reaching agreements, freight movements will again be at risk. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Canada advances oil and gas GHG cap


24/11/04
24/11/04

Canada advances oil and gas GHG cap

Houston, 4 November (Argus) — Canada is proposing to use a cap-and-trade system to reduce greenhouse gas (GHG) emissions from its oil and gas sector, a long-promised but politically contentious move. The proposed program aims to reduce emissions from the sector by 35pc, compared to 2019 levels, by 2030-32, according to a draft rule published by Environment and Climate Change Canada (ECCC) on Monday. It would cover upstream production activities, both onshore and offshore, including for oil, natural gas and liquified natural gas. After an initial four-year phase-in over 2026-29, entities would then need to meet their emissions obligations over the first 2030-2032 compliance period. While all operators must report emissions, only those producing more than 365,000 b/yr of oil equivalent, equal roughly to 99pc of upstream emissions, would be covered by the trading program. Covered entities would receive free allowance allocations, which would decline in line with their emissions cap. Companies could also buy allowances on the secondary market if needed, use carbon offsets or contribute funds to a decarbonization program. The first three-year compliance period of 2030-31, would be set at 27pc below emissions reported for 2026, which ECCC said would be equivalent to the 35pc target. The federal program will not link with the California-Quebec joint carbon market, known as the Western Climate Initiative, regulators said. ECCC officials stressed that the resulting program would cap emissions, not production, for Canadian oil producers, pushing back at a common criticism from opponents. The federal move will keep the industry accountable to its own promise of net-zero by 2050 and result in a greener and more competitive industry, said Canada Natural Resources Minister Jonathan Wilkinson. "As the world moves to reduce emissions generated by the production and combustion of fossil fuels, oil and gas extracted with the lowest production of emissions will have value in the world," Wilkinson said. But Alberta premier Danielle Smith claimed on Monday that the proposed program violates Canada's constitution. Provinces have exclusive authority over non-renewable natural resource development and the proposal ignores ongoing projects in the province, such as the Pathways Alliance, she said. Canadian Natural Resources, Cenovus, ConocoPhillips Canada, Imperial, MEG Energy and Suncor Energy are involved in the project. The program is a cap on production and will cost the province "anywhere from C$3bn-$7bn ($2.1-5bn)/yr" in absent royalty payments because of a loss of 1mn b/d in production, Smith said, promising future legal challenges against the federal government. "The only way to achieve these unrealistic targets is to shut in our production, I know it, they know it. We are calling them out on it, and they have to stop it," she said. Canada, a major net exporter of oil, has committed to reducing emissions by 40-45pc, compared to 2005 levels, by 2030 and net-zero by 2050. But emissions from the country's oil and gas sector remain an obstacle to meeting those goals. The sector accounts for 31pc, or 217mn metric tonnes, of the country's emissions in 2022 , according to the most recent federal data. Emissions from this sector increased by 83pc from 1990 to 2022. Over the past year Canada's federal government has focused on competitive climate change-related policies, from rolling out investment tax credits for decarbonization technologies to enforcement of the government's new Clean Fuel Regulations. But the road for the Liberal Party-led government to meet the climate goals remains a rocky one ahead of a federal election that must take place no later than October 2025. In September, the Conservative Party, led by Pierre Poilievre, attempted a no confidence measure on prime minister Justin Trudeau's government, fed by discontent around the federal carbon tax. While the motion failed, it highlights the balancing act for the Liberal Party ahead of the election. Trudeau has resisted calls from within his party to cede the field as his popularity waned, to the benefit of Poilievre. ECCC plans to request public comment on the proposal through 8 January 2025 and estimates it will finalize the regulations next year. By Denise Cathey Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Construction spending up in September, PVC demand mixed


24/11/01
24/11/01

Construction spending up in September, PVC demand mixed

Houston, 1 November (Argus) — Construction spending rose slightly in September because of stable private investment and marginal growth in public spending. Polyvinyl chloride (PVC) demand stabilized for some market participants in September while other end use segments continued to slow down. Demand into the pipe sector remained solid through September and into October, partially supported by ongoing public investment in infrastructure. Resin demand into exterior profiles like siding, windows, and doors also performed better compared to other PVC products as repair and remodel season and a series of hurricanes in the southeastern US prompted greater demand. PVC contract prices were broadly assessed at a rollover from August with pricing at 59.5¢/lb, but some market participants in markets outside of pipe and profiles reported getting small decreases. Total spending was up 7.3pc through the first nine months of 2024 compared to the same period in 2023. Private construction spending was supported by residential investment while nonresidential spending fell. Manufacturing spending fell while commercial spending rebounded from August, reversing previous month's trends. Highway and construction spending grew for a third month after a two-month slide. Spending on water supply continues to grow. By Aaron May US Construction Spending $mn 24-Sep 24-Aug +/-% 23-Sep +/-% Total Spending 2,148,805.0 2,146,048.0 0.1 2,055,216.0 4.6 Total Private 1,653,624.0 1,653,160.0 0.0 1,592,388.0 3.8 Private Residential 913,632.0 912,186.0 0.2 877,629.0 4.1 Private Manufacturing 234,302.0 234,803.0 -0.2 194,941.0 20.2 Private Commerical 119,191.0 118,927.0 0.2 139,861.0 -14.8 Total Public 495,182.0 492,888.0 0.5 462,829.0 7.0 Public Water/Sewage 76,805.0 76,462.0 0.4 69,634.0 10.3 Public Highway/Road 141,049.0 140,349.0 0.5 138,694.0 1.7 US Census Bureau Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Lyondell reports PO, co-products slowdown in 3Q


24/11/01
24/11/01

Lyondell reports PO, co-products slowdown in 3Q

Houston, 1 November (Argus) — LyondellBasell reported a slowdown in its propylene oxide (PO) and co-products sales in the third quarter, on modest demand and lower derivatives and export margins. LyondellBasell's intermediates and derivatives segment reported operating income of $210mn in the third quarter, down by 65.5pc from $611mn a year earlier. This segment includes propylene oxide (PO) and derivatives and co-products derived from PO production, including oxyfuels (MTBE/ETBE), styrene monomer (SM) and isobutylenes. The company did not disclose sales volumes for its PO business but did note difficult market conditions during the third quarter, as its PO and derivatives results decreased by $35mn from a year prior. "Our propylene oxide and derivatives business encountered headwinds due to volatile prices for propylene feedstocks and volume impacts from Hurricane Beryl and planned maintenance," said executive vice president Kim Foley in an earnings call on Friday. LydondellBasell's newest 470,000 metric tonnes (t)/yr PO and tertiary butyl alcohol (TBA) plant in Channelview, Texas, operated at nameplate capacity during the third quarter, the company said. The company is continuing to target a 75pc operating rate in the fourth quarter for its intermediates and derivatives assets, as its Bayport, Texas, facility undergoes planned maintenance. LyondellBasell expects softer seasonal demand in the fourth quarter, with second half results lower than the first half of the 2024. The potential for lower borrowing costs may drive recovery and PO demand from durable goods, the company said, but it does not expect markets to materially improve in the last part of the year. The company's total operating income dropped by 23pc to $573mn in the third quarter from a year earlier. By Hadley Medlock Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Drive for further use of recycled polyolefins: Jayplas


24/11/01
24/11/01

Drive for further use of recycled polyolefins: Jayplas

London, 1 November (Argus) — UK recycler Jayplas completed commissioning its , in North Thoresby, Lincolnshire. Argus spoke to Jason Davies, PET division director, and Vanessa Morgan, commercial manager, about the progress of the project, the demand drivers for the new plant and to discuss the challenges and opportunities in the UK and wider European recycling market. Tell us about the new HDPE/PP recycling plant in North Thoresby. The plant has everything from sorting all the way through to pelletising, with a capacity of around 25,000 t/yr. We are using natural HDPE post-consumer plastic bottle bales, containing HDPE milk bottles and other food grade HDPE packaging products, which are from UK kerbside collections. Firstly, sorting to remove any contamination, to achieve a quality of infeed material that will reach food grade specification. The material is then size reduced, hot washed and dried, then sent through colour sorters and polymer sorters. The rHDPE flake is then pelletised, which includes an innovative technology from Erema, removing volatiles. The last step is pellet sorting, which will remove any pellets that do not conform to our specifications. We have invested heavily in the technology and process, and we believe it is going to help us deliver a consistent high-quality product. How has demand been since the start-up, and which downstream sectors have shown the most interest? There is a lot of interest across the board. We have had good conversations with manufacturers and brands, from the dairy industries through to packaging for healthcare products, and food packaging. There is a lot of interest in rHDPE, and there is also an increasing interest and demand for rPP, multiple food packaging companies are screaming out for food grade recycled PP pellets. Currently there isn't any volume from the mechanical recycling process of post-consumer source PP pellet that is suitable for food packaging. The majority of them would need European Food Standards Agency (EFSA) approval, when we get EFSA over the line, I have no doubt that this will be one of many lines we will need to install to produce a PCR PP food standard pellet. We are focusing on supporting the increased use of PCR pellet in packaging, producing a high-quality consistent range of recyclate, and supplying to manufacturers across the board. We have bottle manufacturers in the UK that have been looking for a UK supply source of rHDPE to use back into packaging — having a UK supplier also reduces their carbon footprint. It is quite encouraging, and we look forward to seeing the increase across all packaging where possible to include PCR pellets and see a percentage increase in the use as we move forward with new innovation in packaging design. Given that rHDPE and rPP grade suitable for high-end consumer packaging are currently more expensive than virgin polymer equivalents, and there are no mandates to use recycled content, what do you see driving that demand? There is the perception that it is consumer-driven demand, but that is a little bit questionable. If you offered the consumer 100pc recycled packaging but at a higher price, I am not sure they would all be happy about it or if given a choice of a packing with less recycled content, that was cheaper, in the current financial situations people find themselves in, they would go for the cheaper product. What we have heard from a few of the bigger firms is that net zero is a driver from the commercial side — recycled content is significant help to them on the carbon reduction. Most of the companies are doing quite well on Scope 1 and Scope 2 targets, but when it comes to Scope 3, they are reliant on their suppliers to reduce their carbon footprint. Many customers, especially larger ones, request us to commit to certain certifications, which we can only get if our carbon footprint is also reducing. You have got to look at all the benefits, not just the fact that you are using a plastic repeatedly, and our product should help companies to use more recycled content. In the UK dairy industry, most bottles are currently 25-30pc rHDPE content, and achieving more has been technically challenging. But some of the big organisations want to achieve 40-50pc, and we believe with the technology we have and the trials we have run, we can help them achieve that. How price-sensitive are the companies that you are looking to work with, even where they are willing to pay a premium compared with virgin polymer? I would love to say that companies are not as sensitive to price where they feel the product is excellent quality, but in reality, it is still commercially driven. They are willing to pay a premium for the recycled content, but that premium needs to be as small as it possibly can be. Taking the dairy industry as an example — margins are small, farmers are squeezed, the packaging has to be squeezed, everything is squeezed. So, there is reluctance to pay a huge premium over virgin polymer. You said you are applying for EFSA approval for food-contact applications, among other certifications — how easy is that process and what could be done to improve it? Currently we have US Food and Drug Administration (FDA) approval for our rHDPE, and we are submitting for testing to achieve EFSA approval. On rPP we do not have either, but we are going through the process to get both. The UK and European markets still require an EFSA certification for food contact applications. But there are other market segments that would accept an FDA certification, such as household goods and most cosmetics and personal care products. The process is incredibly challenging. The whole supply chain needs to be considered in the process, you need to consider, from how your input material is collected and the contamination potentials throughout that process. I think the minimum we are looking at is six months from when we started the process, and that is obviously not a guarantee. The new plant comes on line at a challenging time for the wider European recycling industry. What can be done to improve the outlook for the industry? The biggest risk we see is material from further afield given the European market superseding the use of UK recyclate. There are always questions about the UK quality because plastic is collected comingled with materials. And I think a lot of people have been told that the quality is not good enough and gone elsewhere to look for supposedly better quality material. Building the infrastructure needed in the UK to help UK recyclers to compete will require legislation, for example stopping imports from counting towards the 30pc recycled content threshold for the Plastic Packaging Tax (PPT) or finding another way to prioritise UK supply. Allowing post-industrial recyclates (PIR) to count towards the PPT threshold is obviously also a hindrance to the post-consumer recycling (PCR) industry. There are certain products, particularly food contact, where you cannot get food-approved PCR, which pushes people towards PIR, but maybe if you rule that out it would drive quicker research and development. There have been some quite high-level articles coming out recently saying the UK recycling industry will die without support, and that support starts at legislation of how we organise the simpler way to collect these materials, and incentivising people to invest. A sentiment that was shared by participants at the latest Recoup conference. Since the Q&A was conducted the UK government announced a reclassification for pre-consumer/post-industrial waste in the annual Budget speech. Pre-consumer waste will no longer be classified as recycled plastic for the purpose of Plastic Packaging Tax. It is important to note that there is a caveat of: "We therefore intend to align the removal of this provision with the timeframe for the adoption of a mass balance approach for chemically recycled plastic, wh ich will be set out in the future. Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Generic Hero Banner

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more