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A number of chemical companies have announced the suspension of production

Author: Lillian Tong
by Lillian Tong
Posted: Jul 18, 2022

Recently, Wanhua chemical announced that according to the annual maintenance plan, the MDI plant (350000 tons / year) and TDI plant (250000 tons / year) of its subsidiary xiongsaide Chemical Co., Ltd. will be closed in 2022. On July 15, 2018, production and maintenance were stopped successively, and the maintenance time is expected to be about 35 days.

A number of listed chemical companies announced the shutdown, and the chemical production capacity of more than 10million tons was "cleared"

Although the announcement mentioned that this move would not have an impact on the company's operations, the chemical "first brother"'s 600000 ton plant production capacity was interrupted for 35 days, which still caused ripples in the chemical market. Workers in the chemical industry are also thinking about whether they should follow the example of "big brother" and slowly stop under the circumstances of sharp decline in orders and soaring costs. In fact, many chemical companies have done so, frequently issuing announcements of shutdown and maintenance, leaving tens of thousands of tons of production capacity idle.

Tongde chemical announced that in accordance with the spirit of the action plan for the comprehensive treatment of air pollution and other documents issued by the local government, the company eliminated the hot blast stove used in the production of silica products and stopped the "production line with an annual output of 10000 tons of silica products". In the first half of this year, due to the epidemic, restrictions on personnel mobility, delays in construction materials, etc., it is expected to be put into trial operation around the end of March 2023.

Dacheng chemical announced that it plans to suspend the phase I and phase II production lines of the Pine Island branch from July 1, 2022, and upgrade some production equipment automatically. Production is expected to resume at the end of August. The supplementary announcement subsequently disclosed by the company made it clear that the shutdown and upgrading time is expected to be about 1.5 months, which is expected to reduce the output of industrial fungicides by about 3000 tons.

In addition, the shutdown and maintenance plan of methanol, ethylene glycol, PP and other chemical companies has been implemented recently, involving a production capacity of more than 10million tons, and the operating rate of the industry is generally low.

Behind the shutdown and maintenance is the shutdown and load reduction, "self-discipline and production reduction" has become the mainstream

According to incomplete statistics, dozens of chemical companies have started to stop production for maintenance, and the affected production capacity has exceeded 10million tons, which can be said to have caused a huge impact in the industry. Although the chemical companies that stopped production or reduced production said that it would not have much impact, many enterprises announced that the market was not as light as everyone said. Shutdown and maintenance bring about the reduction of output and load. Behind this is the crisis that the operating rate of the chemical market continues to decline.

Since June, although the domestic epidemic has been basically controlled and all regions have basically resumed work and production, the expected "retaliatory" consumption has not appeared, some economic data are still declining, and market confidence needs to be restored. In the face of the current volatile market environment, downstream electronics, manufacturing and other industries are very cautious about procurement. Even though the current price trend of the chemical market is basically locked in a slight downward trend, there is no improvement. The orders of indifferent chemical plants have suddenly declined.

Downstream sales are sluggish, holidays are suspended, midstream production and inventory lack enthusiasm, and the upstream situation is difficult to improve. Some people call this phenomenon of shutdown, maintenance and construction "self-discipline and production reduction", which is another way of saying market-oriented capacity reduction. Once the market cools down and the market downturn becomes an industry consensus, everyone will spontaneously reduce the burden, reduce production and avoid risks. Compared with the mandatory measures under the epidemic, this self regulatory shutdown is obviously more proactive, which also reflects that more and more enterprises are beginning to face the loss of cash flow caused by the continuous tightening of profits and the price reduction of chemical products. And other negative feedback intensified, and began to have a "lying down" mentality.

At present, the macroeconomic recovery is still relatively slow, and the overall atmosphere of the chemical market is relatively pessimistic. The situation of high inventory and low demand has deterred many coating and chemical companies. Although many enterprises are still optimistic about the future, it is indeed difficult to predict when the expected large-scale replenishment and supply shortage will occur, and the idea of turning losses into profits is also difficult to achieve. On the whole, the chemical market may remain low in the short term. It operates in shock. In the medium and long term, it will find a balance in the state of low profits.

About the Author

ECHEMI is a chemical supply chain service company headquartered in Hong Kong, providing chemical raw materials supply, research and analysis, marketing, distribution, logistics, E-commerce and after-sales services.

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Author: Lillian Tong

Lillian Tong

Member since: Jun 26, 2022
Published articles: 25

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