Middle East capacity to impact PE output in 2009

27 March 2008 10:06  [Source: ICIS news]

SINGAPORE (ICIS news)--Global high and linear low density polyethylene (HDPE and LLDPE) production rates will fall next year, as new capacities in the Middle East intensify global competition and force producers to cut output, a senior executive of PTT Chemical said on Thursday.

 

The lower production rates - estimated at 83% and 82% respectively - would cost producers, said Veerasak Kositpaisal, Thailand-based PTT Chemical’s executive vice president, polymer products value centre, at the 2nd International Polyolefin Forum here.

 

“Every 1% cut in the production rate would cost about $25-50/tonne to a PE producer,” he said, adding naphtha-based PE producers would be the first to be hit by the influx of Middle Eastern material into the global markets.

 

“Europe will be the first to be affected as Middle East producers are expected to target that market first and most of the PE producers in Europe are naphtha-based,” he said.

 

The global average HDPE and LLDPE production rates were estimated at 86% and 85% respectively this year, he added.

 

However, global low density polyethylene (LDPE) production was expected to rise to 85% next year, 1% higher than this year, and stay there the following year mainly due to tight supply globally, he said.

 

Global LDPE supply was expected to remain tight over the next two years as no significant new capacities were scheduled to come on stream during this period, he added.

 

Investments in new LDPE plants had been limited due to the general perception of it being obsolete and the higher costs of producing this grade, said Kositpaisal, adding that LDPE production costs could be as much as 50% higher than other PE grades.

 

The option for many existing LDPE plants to produce ethylene vinyl acetate (EVA) would also cap LDPE supply, he said.

 

EVA prices had been rising in the past year on the back of strong demand growth in China and south Asia, and the lack of investments in new plants in the past two years, market players said.

 

The two-day conference, organised by ICIS partner CBI China, ends on Friday.

 

Helen Lee contributed to this story. For more on PE visit ICIS chemical intelligence

 

By: Chow Bee Lin
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