04 April 2005 22:41 [Source: ICIS news]
Speaking on the sidelines of the 30th International Petrochemical Conference (IPC)*, Smith suggested that markets would get tighter and within a year some rationing of product by suppliers was inevitable. Lyondell is running its ethylene plants at 95% of capacity now, he told CNI, adding that propylene oxide (PO) availability currently is extremely tight. As demand continues to expand, pressure in markets will increase, he suggested.
Smith is encouraged by the breadth of the upturn and the way in which markets have “snapped back” to trend line growth. This was a tough recession, he said, brought about by too much building in North America and the fall-out from the terrorist attacks on the US in September 2001. Earlier today, in a keynote address to the conference, he warned of overbuilding by producers once again driving the downturn. However, he suggested later that in North America at least he sees no signs yet of anyone “going crazy”.
“I’ve never seen a confluence of supply and demand as broadly based as now,” Smith said. Lyondell is selling into extremely tight markets for most of its refinery and petrochemical products.
Smith has indicated before and reiterated today that Lyondell will use cash generated through this upturn to pay down debt. Analysts have estimated that the company could pay down as much as $3.2bn (about Euro2.4bn) of debt between 2005 and 2006. Recognition of the importance of debt reduction across the company is significant. More than 97% of employees worldwide recognise debt repayment as a priority, he said.
Capital spending in 2005 will be directed largely to plant reliability and process improvements, Smith indicated. Lyondell will raise capital spending to $332m this year from $229m in 2004 - still well below depreciation ($660m in 2004). A major proportion of additional spending will be allocated to upgrading refinery units to meet new environmental regulations.
*Sponsored by the National Petrochemical & Refiners Association (NPRA), the IPC continues through Tuesday.
(The CNI newsroom at NPRA’s IPC is in Salon C, Marriott Riverwalk Hotel; Tel. +1 210 299 6585.)
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