FocusFalling demand prompts INEOS PP cuts

10 November 2008 23:47  [Source: ICIS news]

By David Barry 

HOUSTON (ICIS news)--Declining polypropylene (PP) consumption in North America was a major factor in INEOS’ decision to close two lines in Texas, industry analysts said on Monday.

Through August, PP consumption was down by 8%, according to industry sales figures. There was no sign of improvement in the fourth quarter, making it likely that 2008 would be the third consecutive year of decline for PP consumption, sources said.

“All the feedback we’re getting now is that October was a disaster sales-wise,” said Dave Durand, director of global PP consulting at Townsend Polymer. “Those lines do not have the economics to compete in this market and what’s going to be a downturn.”

Durand said many PP converters were running off inventory in October because of falling feedstock and resin prices.

Since mid-year, domestic PP manufacturers also faced a weakening export market because of falling demand worldwide, said Jim Virosco, manager of polymers consulting at Nexant.

“Demand has fallen off a cliff in the automotive sector,” Virosco said, adding that sales of PP-based household durables such as carpet fibre were also weak.

But domestic demand could get a lift when prices bottom out and customers start restocking, Virosco said.

“We hope the prices are bottoming out right now, but historically there’s a tendency to overshoot,” he said.

The two lines INEOS announced for closure were constructed in the late 1970s with Solvay technology, according to Townsend’s Durand. A third line at the site operates with modern gas phase technology and was likely to continue operating, he said.

Further capacity cuts were likely, Durand said, but he declined to speculate on which sites were likely candidates.

Townsend’s industry forecasts show the North American market becoming a net importer of PP within the next five years.

Nexant’s Virosco said his trade balance models show the region importing more than it exports starting around 2011.

For more on INEOS's Texas polypropylene plants, visit ICIS plants and projects
For more on polypropylene visit ICIS chemical intelligence
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By: David Barry
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