Canada's NOVA has contrarian view on PE slump

10 April 2008 19:03  [Source: ICIS news]

HOUSTON (ICIS news)--Canadian producer NOVA Chemicals does not expect future polyethylene (PE) operating rates to plunge drastically, and the company should outperform its peers on price-advantaged feedstock, an executive said on Thursday.

Many have forecast a drop in operating rates, due to new capacity in the Middle East and Asia.

"We disagree with their perspective and believe that ethylene/polyethylene (PE) fundamentals will remain strong and surprise to the upside," said Jeffrey Lipton, NOVA chief executive.

Lipton was speaking to NOVA's shareholders during the company's annual meeting.

Lipton said companies will likely delay the start up of new capacity in Asia and the Middle East.

In addition, the new capacity will likely experience reliability problems, since the companies will not have the trained engineering and operating personnel to run such complicated facilities, Lipton said.

As such, NOVA is predicting that global PE operating rates will exceed 90% to 2012.

Even if the new capacity comes online with no feedstock constraints, Lipton said NOVA will maintain its feedstock cost advantage.

NOVA Chemicals relies on natural gas from Alberta, which gave the company a record price advantage of 17 cents/lb ($375/tonne) in 2007, Lipton said. This year, NOVA achieved a first-quarter record of 21 cents/lb.

"We have confidence that our Alberta assets will continue their absolutely superb performance," Lipton said.

NOVA shares were trading at $25.07 (€15.79) on the New York Stock Exchange, up 4.68%.

($1 = €0.63)

For more on ethylene and PE visit ICIS chemical intelligence

For more on NOVA visit ICIS company intelligence

 

By: Al Greenwood
+1 713 525 2653

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