Packaging demand for PE, PP still healthy - LyondellBasell

10 February 2009 12:39  [Source: ICIS news]

(Recasts 7th paragraph for clarity)

Mitchell Killeen of LyondellBasellNEW DELHI (ICIS news)--LyondellBasell is continuing to see healthy demand for polyolefins from the packaging segment in India, the Middle East and Africa, offsetting the decline in the automotive segment, a senior company executive said on Tuesday.

"Packaging, especially food packaging, is one area which has remained healthy, and is the main demand driver for polyethylene (PE) and polypropylene (PP) in the midst of the global economic downturn," said Mitchell Killeen, LyondellBasell’s divisional vice president for Africa, the Middle East and the Indian subcontinent.

Killeen spoke to ICIS news following the conclusion of the PlastIndia 2009 exhibition and conference in New Delhi, India, which ended on 9 February.

Packaging standards in India were improving, with people demanding high quality products, Killeen said. "Even countries like Egypt and Morocco are seeing firm demand in packaging," he said.

However, demand growth in other segments, especially automotive, has been adversely affected by the economic slowdown, he said.

Killeen said one fallout of the decline in demand was consolidation of supply by polyolefins producers, including LyondellBasell.

Capacity utilisation in the polyolefins industry has fallen to around 70%, Killeen said.

The company has also permanently shut a couple of PP plants in North America and has just announced a two-month shutdown at its Carrington low density PE (LDPE) plant in the UK.

"If there is further consolidation in the industry, it would be in its less competitive assets," Killeen said.

Notwithstanding the efforts at consolidation, LyondellBasell is continuing to pursue projects in competitive locations such as the Middle East, where feedstocks were abundant at low cost, Killeen said.

LyondellBasell’s new joint venture projects in the Middle East include the 450,000 tonne/year PP plant Al Waha Petrochemical Co, which will start up in Saudi Arabia by the end of March this year, and the expansion of Saudi Polyolefins Co’s PP plant to 720,000 tonnes/year by the end of February.

Adding weight to LyondellBasell’s PE portfolio is Saudi Ethylene and Polyethylene Co’s cracker complex at Al Jubail, which started up late last year.

The complex includes the recently started 400,000 tonne/year high density PE (HDPE) unit and an LDPE unit of the same size, which is set to go on stream in the third week of February.

"The punctuality of our Saudi Arabian joint venture projects is certainly a positive indicator, and shows that the company is able to use its strong presence in the Middle East to leverage the current situation," Killeen said.

When asked about the market jitters surrounding the prospects of a further price collapse when the new Middle East plants start up, Killeen said: "Demand and supply, along with feedstock costs, will continue to determine pricing, and the industry has to find ways to remain competitive in this uncertain environment."

One way of coping with such a volatile market would be to add value to products, he said.

"Take, for instance, LyondellBasell’s Metacene PP, used in applications ranging from soft wipes to filters and industrial oil absorbents. We are already selling significant volumes of this grade globally," he said.

Sales of this metallocene grade in India, however, were still low, but were set to improve in the coming years, he said.

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By: Prema Viswanathan
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