Positive on Petronas Chemicals’ upcoming melamine plant in Kedah

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Mohd Yusri Mohamed Yusof

KUCHING (January 21): Analysts are upbeat on Petronas Chemicals Group Bhd (PCG) building a 60,000-tonne-per-annum melamine plant in Gurun, Kedah, making it the sole melamine producer in Southeast Asia (SEA).

Targeted to come onstream in 2024, this project is in line with PCG’s growth journey to expand into derivatives by adding value to the molecules from its existing products such as urea, methanol, polyolefins, and others.

Petronas Chemicals, through its wholly owned subsidiary, Petronas Chemicals Fertiliser Kedah (PCFK), will be using the urea produced from PCFK as the feedstock to produce melamine.

“This is a significant milestone for PCG and further strengthens our strategy of diversifying our product portfolio.

“By housing the plant within the vicinity of PCFK, we will be able to maximise the overall value through the integration of feedstock and utilities with the existing PCFK facility,” said Petronas Chemicals managing director and chief executive officer Mohd Yusri Mohamed Yusof in a statement.

MIDF Amanah Investment Bank Bhd (MIDF Research) noted that the planned project is part of Petronas Chemicals’ plan to develop derivatives by adding value to molecules from its existing goods, such as urea, methanol, polyolefins, and other chemicals.

“To make the melamine, it aims to employ urea from its wholly-owned PCFK business as a feedstock. The group confirms that this project is an important milestone as it reinforces the group’s diversification of its product line,” it said in its corporate review.

“Locating the plant within the vicinity of PCFK, the group will be able to maximise overall value by integrating feedstock and utilities with the current PCFK facility.”

MIDF Research also observed that there is a growing trend for melamine, which is typically used in the manufacture of fertilisers, plastics, lacquers, adhesives, and insulation.

As of 2020, melamine demand was at 1.6 million metric tonnes and is projected to grow in the near future.

“Like most products, Covid-19 had a negative impact on melamine production in 2020, as construction and automotive sectors were halted, subsequently decreases demand for melamine products used in said sectors.

“With the easing of lockdowns in tandem with increasing vaccination rates, demands for melamine products would eventually return,” MIDF Research said. “The risks on melamine market growth are: emergence of another pandemic lockdown; high availability of substitutes; and high tariffs affecting demand.

“Given that the proposed melamine factory is still within preliminary stage, the project will not have any significant impact on PCG’s FY22 performance. Hence, we make no changes to our earnings estimates.”