(SINGAPORE) It's going to be a tough road ahead from this final quarter onwards for Singapore's petrochemical plants, which managed to do relatively well during the last two quarters - thanks to some delays in expected new Middle East capacity.

Q3 was reportedly better than even Q2, when plants here returned to near full capacity after the earlier economic downturn.

Still, more new capacity is kicking in. China, for example, saw ExxonMobil's Fujian cracker being fired up last month, while next year will bring two new Thai crackers, as well as mega ones in the Gulf, industry sources warned.

This means that the two new Singapore crackers - Shell's US$3 billion, 800,000 tonnes per annum (tpa) Bukom facility starting up in Q1 next year, and ExxonMobil's US$5 billion, one million tpa second complex in early-2011 - will run smack into a supply overhang, with prices of petrochemical products likely to be depressed.

'We are getting into an inflection point where, while overall, economies are recovering, there is also going to be this huge supply of new petrochemicals capacity,' one industry official said.

Demand from China - a market which is important to Singapore producers - stayed firm in Q3, but is expected to soften in Q4.

'Signs of a softer market there emerged over the last couple of weeks, but we are not sure if this is due to the holidays related to the country's recent 60th anniversary celebrations, or to new supply like that from the Fujian complex,' the industry source said. He was referring to the 800,000 tpa Sinopec joint venture cracker with ExxonMobil and Saudi Aramco which started up last month.

But whether this market situation proves lasting or just temporary, the fact is that even more new Chinese capacity is coming up in Q4, including the Dushanzi Petrochemical project.

In Q1 next year, Shell's new Bukom cracker will start up at around the same time as two new Thai crackers, including that in Mab Ta Phut by PTT Chemical, which will add two million tpa. After that, an additional 5-6 million tpa of capacity will also come up in the Gulf, including in Yansab in Saudi Arabia.

'The fact that the Middle East new capacity did not start up as quickly as the industry feared brought some temporary relief in Q2 and Q3,' the source said, adding that the delays there were due to issues such as availability of ethane or gas feedstock which affected the scale of planned projects.

But Yansab, at Yanbu industrial city, when it finally starts up, is expected to be one of the world's largest petrochemical complexes.

Singapore currently has two operating complexes on Jurong Island - Petrochemical Corporation of Singapore's 1.4 million tpa facility plus various downstream plants, and ExxonMobil's 900,000 tpa Singapore Chemical Plant complex.

When the two new complexes here start up, the total ethylene capacity here will be boosted to just over four million tpa.