Kuwait’s Petrochemical Industries Company (PIC) started operations at a $2 billion aromatics plant this week and is expected to hit full capacity by early December, a company executive said on Wednesday. The plant, which has a nameplate capacity of 830,000 tonnes per year (tpy) of paraxylene and nearly 400,000 tpy of benzene, can produce up to 1 million tpy of light naphtha, and is currently operating at 60 percent, Saad al-Ajmi, deputy managing director of administration and finance, told Reuters. “We started with 60 percent and we will reach 100 percent within a month, which is the first week of December,” he said. The plant will require about 2.7 million tonnes of naphtha to produce derivatives like paraxylene and benzene, Ajmi said, adding PIC would purchase the feedstock from the Kuwait National Petroleum Company (KNPC). PIC and Kuwait National Petroleum Company each have a 40 percent stake in the plant — Kuwait Aromatics, with Qurain Petrochemical Industries holding a 20 percent share.

Kuwait has been terminating term contracts with its customers as it is looking to divert the cargoes to the aromatics plant, traders said. In its latest contract negotiations for supplies lifting from December 2009 through November 2010, Kuwait has terminated contracts with Japanese trader Marubeni and Mitsubishi Corp . “Kuwait will most likely drop contracts with trading companies first, their priority now is to service end-users,” said a Northeast Asian trader. Kuwait’s current term talks have offer levels being pegged at a premium of $14 a tonne to Middle East benchmark prices. Prior to the contract termination, Marubeni and Mitsubishi were expected to receive between 175,000 and 225,000 tonnes of full range naphtha from Kuwait for the 12-month period between December 2009 and November 2010, traders said.

The termination of these contracts are coming at a time when spot demand in Asia has strengthened compared to early October, on a revival of petrochemical demand in China, traders said. “The sentiment is that the global economy is in recovery mode, this is going to naturally give the manufacturing sector a nice boost,” a Singapore based trader said.

HSBC’s China Purchasing Managers’ Index (PMI) rose to an 18-month high in October of 55.4 from 55.0 in September, the seventh straight month that the index compiled by British research firm Markit and released on Monday, has been above the watershed of 50 that divides expansion and contraction. Export orders hit a 28-month high a pre-production inventories rose for the first time since July 2007. “We will see the market firm up if sustained recovery is seen over the next few months, it looks like we’re finally out of the woods,” the trader said.