06 October 2008 16:57 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--A great hole is opening up under polymer margins the depth of which is nigh on impossible to determine.
In the face of recession in North America and
For the polymer producers the worse case scenario is starting to be played out. Holding margins in a rising market may not be easy but is significantly easier than trying to maintain control of a business with demand and prices in free fall.
The sector is not quite in that situation yet but in some regions market weakness has been apparent since the beginning of the year. In the
The slowdown in demand growth has until now been masked by supply chain inventories but those clouds are drawing back to reveal the true situation. Producer stocks are building as the situation deteriorates.
Polymer prices have fallen sharply over the past two weeks. Producers in
Of great concern has to be the news out of
The global financial crisis is biting into economic growth and hurting the consumer. And on Monday the oil price fell further - to below $90/bbl for the first time since February this year. There is growing concern on the oil markets that the credit crisis will not only hit demand in the
The drop in the oil price opens up a hole in front of the polymer producer by putting further downward pressure on already much weaker prices.
This weakness, also, comes at a particularly difficult time as more polymer becomes available from ne low-cost production facilities in the
There were suggestions last week that the European market was feeling the first effects of the
Producers have some leeway: they can cut prices further to help stimulate demand and to try to capture more volumes. But that begs the question of whether the downstream demand is there.
In that respect there is some way to go. Going back to 2003, the last time the polymers business in
Polymer producers have had time to prepare for difficult times and have expected a tough couple of years. But the bad, or increasingly worse, times have been thust upon them sooner than forecast only recently, and with greater force.
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