14 March 2008 14:57 [Source: ICIS news]
LONDON (ICIS news)--Producers for years have expressed concern about the mountain of olefins and polyolefins capacity that could destabilise the global petrochemicals business. Their attention now has to be turned to the enveloping global credit crisis.
Record feedstock and commodity prices, a seriously weakened US dollar, the slowed ?xml:namespace>
A few weeks ago the credit crunch was not so much being passed off as being played down.
Not a great deal has changed on the industry front and there are few signs other than in specific market segments of a downturn.
Yet the odds are stacking higher against the industry.
Producers stick to their guns when they look at supply and demand. They generally know what plants are due on-stream where; the wild card continues to be
But it is the prospect for considerably slowed demand growth that should raise most concerns.
The global credit crisis has acquired nightmarish proportions. Sharp adjustments to capital flows are by no means played out.
The knock-on effect on consumer demand in the
For the chemicals sector there have already been stark warnings of a sharp slowdown in
Industry players know they are in for challenging times. The question now is just how challenging.
Quite rightly industry executives are most concerned about volatility, and they are being dealt that in spades.
Producers in certain regions,
Again there is little direct evidence across the sector of a severe demand slowdown or of severe margin erosion. But the outlook is clouded to say the least.
In the coming few months it will be the producers who have bedded in the right assets in the right markets who will fare best. The stronger the balance sheet the better.
Companies should have used the past few very good years to build defences in fixed asset, financial and technology terms.
The mountain of new polyolefins capacity looming on the horizon then is less daunting. The slowdown, however, from an industry point of view looks increasingly scary.
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