26 March 2007 23:08 [Source: ICIS news]
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These facts alone should make petrochemical industry watchers sit up.
Construction delays are not widespread across the Middle East some commentators suggest. Significant volumes of ethylene and ethylene derivatives will be available later this decade and find a ready home in markets in the west.
Olefins and derivatives producers in Europe and the
This is not a doom and gloom scenario. “[Cracker] delays in the Middle East, with the exception of
Ethylene capacity additions this year may be limited to three units but the wave of new output building up is unprecedented.
Two crackers in Iran, the Araya Sasol complex (Olefins number 9) and the Jam cracker, (Olefins number 10) are expected at last to start up in the second half of this year as is Formosa Petrochemicals’ 1.2m tonne/year unit but the output from these units will really be just a drop in the ocean.
In 2008 four of
The question is then whether it is too easy currently to be overly positive on the sector outlook. Certainly, construction costs have risen dramatically. Capital equipment and construction skills are difficult to come by.
There is much talk of construction delays postponing the inevitable sector downturn or even militating against its effects. Yet Potter particularly points out that new capacity from
The Saudi plants will probably be brought up to full output quickly. The question then is whether capacities from plants ready for start-up later in the decade in
Additional derivates volumes out of the Middle East will find ready markets in Europe and
The impact on profitability is inevitable. As competitive pressure builds so will the pressure on commodity prices. Some players will find refuge in more specialised polymer areas – like pipes, wire and cable – but others will be exposed.
A testing time for petrochemicals awaits the real threat being the capacity cycle hitting the sector once again with a vengeance.
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