Thailand petrochemical demand to stay weak despite 1 Sept re-opening

SINGAPORE (ICIS)–Thailand’s petrochemical market outlook remains weak in the near term as the country battles its worst COVID-19 outbreak to date, with its economic recovery expected to be slower compared with peers in southeast Asia.

Southeast Asia’s second largest economy is set to ease pandemic-related restrictions in Bangkok and 28 other provinces on 1 September, but domestic market players worry that this will lead to fresh spikes in infections and cause demand to wane even further.

Starting Wednesday, shopping malls will re-open, dining in at restaurants will be allowed and domestic travel will resume, after nearly two months of lockdown to contain recent spikes in coronavirus infections.

In the polypropylene (PP) market, demand has remained sluggish as production activities continued to be disrupted, with converters operating at reduced rates over the past couple of months as some have had to deal with infections within their complexes.

End-product sales have also been slow. Some buyers wanted to wait until end-product demand improves when the control measures are lifted before restocking.

While some hope that this will give a boost to end-product sales, there were concerns that the move would cause the pandemic situation to worsen.

Import interest was marred by shipment delays, with some buyers complaining that the deliveries of their cargoes were a few weeks late as shippers struggled to secure vessels.

For ethylene vinyl acetate (EVA), local production was largely not affected by the restrictions, with local uptake steady.

“It [easing of restrictions] will help a bit but won’t affect the [purchase] volume much,” said a supplier.

“Many of the [local] EVA resin customers focus on exports markets and shipping is more of their concerns these days,” the supplier added.

Thailand is also an exporter of EVA. June shipments stood at 8,612 tonnes, down 31% from May, according to ICIS Supply & Demand Database.

For isopropanol (IPA), domestic demand has weakened while the country is beset with abundant supply.

Ramped-up production of downstream hand sanitizers amid the pandemic has not translated to stronger demand for IPA as it is being substituted with ethanol, market sources said.

“Ethanol has a better smell than IPA and it’s a natural product from sugarcane,” a market source said.

IPA also has applications in paint solvents and surfactants.

“I won’t be procuring any September cargo as I still have a few on the way [due for September arrival], so the earliest demand may recover is October,” an end-user based in Thailand said.

For ethyl acetate (etac), Thailand’s import demand, along with those of southeast Asia, has remained sluggish amid burgeoning regional supply.

“Southeast Asia is super weak so [suppliers] are likely to want to support and roll-over the offers. Stocks in Thailand is in a surplus for [etac and butac],” said a regional market source.

“I don’t think demand would improve yet in the near term,” the source said.

In the EVA market, soda ash and acetic acid sectors, the flooding in industrial estates over the weekend has not affected any downstream factories.

“I think demand for acetic acid and soda ash will not be much affected,” said a local distributor.

FLOODING THREATENS INDUSTRIAL ACTIVITY
Bangkok and surrounding areas are currently being inundated by heavy rains, causing recent flooding at an industrial hub.

Factories at the Bangpu Industrial Estate in the Samut Prakan province, located south of the capital, have had to shut temporarily as the estate was submerged in one-metre water on 29 August.

The province houses petrochemical companies including AGC Chemicals, which produces caustic soda; and Ming Dih, which manufactures expandable polystyrene (PS).

Heavy rains are expected to continue in the capital throughout the week.

HIGH COVID-19 CASELOADS REMAIN A WORRY
“Thailand has been hit very hard by the COVID-19 crisis and harder than our neighboring countries. As a result, our economic recovery is likely to be slow and lag that of the region,” Bank of Thailand governor Sethaput Suthiwartnarueput had said in a speech on 25 August.

Recovery prospects are being weighed down by the tourism industry, a growth pillar for the country which took a heavy beating amid the pandemic.

Thailand is expected to lag behind others in the region, with 2021 GDP growth projected at 1.6%, coming from a contraction of 6.1% in 2020.

GDP growth forecasts for Thailand this year have been downgraded for five months in a row, “as the effects of the pandemic on domestic activity and tourism, coupled with a relatively slow vaccine rollout weigh on outlook”, Spain-based FocusEconomics said in its September ASEAN Consensus Forecast report.

“The FocusEconomics panel sees the economy expanding 1.6% in 2021, which is down 0.6 percentage points from last month’s projections, before growing 4.3% in 2022,” the research firm said.

Also clouding Thailand’s economic outlook is the low vaccination rate compared with Malaysia, Indonesia and the Philippines.

“Given that Thailand has been hit severely by the third wave of the outbreak with subsequent lockdown and the likelihood in achieving a larger share of vaccinated population that will take some time, this indicates that the recovery is likely to be slow going forward,” Thai central bank governor Sethaput had said.

As of 29 August, only around 11% of Thailand’s population of about 66m are fully vaccinated.

“While active COVID cases have started to decline marginally from the peak, towards end-August, owing to the ongoing vaccination drive and control measures, new daily cases still remain a concern,” Japan’s Nomura Global Markets Research said in a note.

Thailand saw a strong surge in COVID-19 infections over the past month, breaching the 1m case mark on 19 August from 100,000 cases in mid-May this year.

Infection levels have since eased, with the country reporting 14,666 new cases on Monday, down sharply from the record daily record high of more than 23,000 fresh cases in early August.

Focus article by Nurluqman Suratman and Pearl Bantillo

Additional reporting by Jackie Wong, Julia Tan, Helen Lee and Melanie Wee

Photo: Heavy rains caused floods in Samut Prakan province in Thailand on 29 August 2021. (Source: Xinhua/Shutterstock)

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