Bayer May Further Delay Chinese Polycarbonate Project

Bayer MaterialScience may further postpone its proposed polycarbonate expansion in China due to continued problems in market conditions. That comment was made by Ian Paterson, member of the plastics producer’s Executive Committee at a press conference in New York City on June 27.

The first stage of the new production plant near Shanghai came on line a year ago, adding 100,000 metric tons of capacity. The initial plan was to add another 100,000 metric tons by the end of this year. The project was first pushed back because of a shortage of components in China due to booming construction. “We may delay startup longer,” announced Paterson at the press conference. He said that PC demand is growing at about a 10 percent rate per year globally, but there are fears that the China market could become flooded.

There are also concerns that use of polycarbonate in compact discs could slow because of music downloading from the Internet. Another cloud hanging over the PC market has been surging prices for feedstocks. This comes despite some easing of hydrocarbon pricing. Crude oil futures have been trading about $7 below a year ago. “There has been a decoupling of oil and derivatives because there isn’t enough capacity for the derivatives,” Paterson said.

Petrochemical producers in Asia are particularly dependent on naphtha, a light distillate that has been trading at record levels recently in Asia — yet another reason to slow expansion in China.

Paterson said that Bayer is aggressively attacking other costs to maintain profitability, and is also having some success passing on price increases. On June 14, Bayer hiked PC prices 14¢/lb. Flame-retarded PC was selling for around $2/lb before the price hike.

Another consideration for Bayer is the potential market impact of SABIC’s acquisition of GE Plastics, which is expected to be completed later this year. GE Plastics is also a major producer of polycarbonate.