PE consumption remains strong - NOVA

23 October 2008 22:46  [Source: ICIS news]

HOUSTON (ICIS news)--Global polyethylene (PE) demand has weathered previous economic downturns and North American consumption remains strong going into the fourth quarter, NOVA Chemical executives said on Thursday.

“PE has remained strong because it is used to manufacture consumer staples,” said chief executive Jeff Liston during the company’s quarterly earnings conference call.

NOVA posted a third-quarter net income of $98m (€76m), compared with $97m in the year-earlier period, on a 19% increase in sales.

Global PE demand growth had held a fairly steady trend, even during economic slowdowns in the early 1990s and 2000s, Liston said.

He said the most pessimistic GDP growth forecasts currently are in the range of the 2000-2001 growth rates, but developing economies were expected to fare better during this downturn.

Consumers in those economies consume an average 14 lb/year PE per capita, compared with 80 lb/year in advanced economies, leaving enormous potential for growth, especially for food packaging applications that prevent spoilage, he concluded.

In North America, Liston cited NOVA estimates that converter’s resin inventories are relatively low and continuing to drop quickly.

“It’s clear customers will have to order heavily to maintain production,” he said, noting early signs of credit loosening that would make it easier for customers to restock.

A large packaging converter gave a sharply different view of the market’s health, saying that volumes are down among all processors and among their downstream customers.

The source said he had been inundated with calls from brokers over the past three days, seeking to move surplus resin.

NOVA’s shares on the New York Stock Exchange fell to a 52-week low of $11.45 before strengthening slightly in afternoon trading.

($1 = €0.78)

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By: David Barry
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