11 May 2007 16:52 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--Petrochemical and polymer producers look set for another strong quarter as margins in key product chains continue to hold while others improve.
Higher priced oil, naphtha and natural gas are keeping the pressure on costs but producers are pushing prices higher downstream. Continued tight supply/demand balances are helping to keep margins afloat.
The vinyls sector has been hard hit by the sharp downturn in the
Chlorine and polyvinyl chloride prices are rising. Some operational problems in the second quarter are keeping supply/demand balances tight, analysts suggest. An improving construction trend will help the business but in the medium term the sector faces some structural problems with the addition of new capacity.
Globally the petrochemicals business is bracedfor the arrival of new ethane chain capacity in the Middle East, first in
The jury really is out on whether construction delays will help maintain the earnings ridge apparent across so much of the industry.
The expected downturn has been pushed out to around the end of 2008. The big new capacities are for ethylene chain derivatives like glycol and polyethylene although lower cost commodity polypropylene capacities will also build.
The impact of the new capacity additions on Europe will be lessened given the growth in demand for mainstream chemicals from the expanding economies of central and eastern Europe and eventually from
The supply-driven downturn in key polymers, however, is likely even against the backdrop of a stronger global macroeconomic environment.
Bank of America (BoA) last week forecast a decline in the global ethylene cycle beyond 2008 based on 8% average annual supply growth between 2009 and 2011 compared with 4% demand growth.
Industry consultants have suggested that profitability could fall to the level seen between 2000 and 2003.
Producers are less convinced, however, that Middle East polyethylene (PE) can be delivered cost-effectively to
Lyondell, for instance, estimated at a BoA conference that PE from the Middle East or for
A similar analysis suggests that delivered costs from North America, the Middle East and South Korea are at near parity, the Bank says, although it still believes North American export opportunities will be reduced by the end of the decade.
Producer presentations at BoA’s Basics and Industrials conference in
Ethylene producers enjoy fundamental momentum, they said. Commodity chemical prices have been on the rise since March following five months of erosion.
The bank is not alone in anticipating healthy ethylene chain results through 2008.
Isha Jha contributed to this article
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