26 March 2007 00:16 [Source: ICIS news]
By Nigel Davis
The sector relies heavily on technology and on feedstock advantage, and US producers particularly have lost one key driver but not necessarily the other.
However, high global plant construction costs – and subsequent project delays – may alleviate the situation.
At or near the top of their profitability cycle, producers are rightly concerned with just how much longer the good times can last.
Prices have held up remarkably well despite feedstock cost volatility. The fact that they have suggests more than anything that the writing (in terms of the inevitable downturn) is not yet on the wall.
The drive outside the
Producers in faster growing markets see opportunities to consolidate regional businesses and grow. There is the money around to invest big time in chemicals.
In large established markets, the drivers are different and there are nuances. Nevertheless, investment dollars are the key, as is widely apparent at this year's NPRA chemical conference..
The cash being generated now is being used differently – to seek out new markets and for many players more market-led opportunities, rather than simply to add capacity.
Creating new growth platforms relies more heavily on clever M&A (merger and acquisition) activity and technology. Some moves have created great interest, and others over the coming months surely will.
The (M&A) market in chemicals has been also opened up. No longer simply the playground of industry stalwarts, private equity continues to make its mark. New producers have stepped into the scene. Possibly hedge funds will follow.
For the chemicals majors, dealing with industry volatility is one thing. Competing in a world where entrepreneurs of many types seek competitive advantage is another. The petrochemicals business has globalised and has increasingly become a plaything in global capital markets. There are great forces at work.
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