Posted on 04 Dec 2008
Petroliam Nasional Bhd (Petronas) has shut down indefinitely several petrochemical plants in Kertih, Terengganu and Gebeng, Pahang as demand for polymers fell sharply due to a slump in overseas factory orders.
Chairman and chief executive officer Tan Sri Hassan Merican said the materials were used to produce consumer goods and hence would be the first to get hit in a global slump.
“Resins are stocking up at Kertih due to lack of demand. When there’s no market for polymers or resins, there is no point producing,” he said. He did not give a timeframe when production would resume.
He said amongst plants whose production had been halted were those processing polyethylene, which is used in manufacturing plastic packaging, automobile parts and food wrappings.
Asked to comment on reports that
“I’m not aware of it,” he told reporters after the launch of the third International Petroleum Technology Conference yesterday.
Kertih and Gebeng are the sites of integrated petrochemical complexes which Petronas constructed to process various petrochemicals ranging from polyethylene to polypropylene.
Other petrochemicals processed at the two complexes include polyvinyl chloride, aromatics, olefins, ethylene derivatives and ethylene.
According to its website, Petronas has joint ventures with BP Chemicals in a polyethylene plant in Kertih while BASF AG and Petronas are partners in several BPC plants in Gebeng.
BASF, a German chemical company, had shut down 80 plants worldwide following low demand for its products. The company, which operates 12 plants locally under a joint venture with Petronas, has brought forward the scheduled maintenance of six of these plants.
BASF said the scheduled maintenance was being brought forward because of weak demand. “We’re constantly monitoring market conditions and customers’ demands, so it is still too early to provide an accurate timing of the maintenance schedule of all the plants,” it said.
An industry observer said orders had been declining in recent months following the
The slump in global demand was also reflected by the sharp decline of the Baltic Dry Index, which is a measure of dry bulk traffic, from a high of 11,689 points on June 5 to 684 points yesterday as factories cut production.
The credit crisis, the bankruptcy of Lehman Brothers Holdings Inc and collapse of over 20 banks in the
This in turn caused a spiral effect whereby factories could not receive payments and were forced to shut down, he said.
“Several of these importers more than likely got their letters of credit from banks that went bust and so will not be able to honour their orders now,” he told StarBiz.
These factories, faced with rising inventory due to a slump in orders, would also not restock the polymers and resins needed for a whole range of products, hence the need to shut down or bring down production at these plants.
“The next few years will be quite bleak. I’ve been in the business since 1972 and never have I heard of plants shutting down indefinitely; there are shutdowns but they are usually temporary,” he said.
However, he added that oil refining at the complexes was not affected by the shutdown despite oil prices having fallen from a high of US$147 in July to US$47 per barrel yesterday.
