NPRA '09: Sale of US plants may slow recovery - consultant

30 March 2009 18:58  [Source: ICIS news]

SAN ANTONIO, Texas (ICIS news)--Cuts in capacity, which are needed to revive the industry, could be blocked if overseas companies start buying North American petrochemical assets, the managing director of Houston-based consultant DeWitt & Co said on Monday.

"I would not be surprised if we see companies from overseas, and not only the Middle East, wanting to take more of a footprint in the US,” said Earl Armstrong on the sidelines of the International Petrochemical Conference (IPC).

He added: “This might inhibit capacity shutdowns and make the recovery worse.”

Armstrong estimated that 7-8bn lb/year out of a total 62-63bn lb/year of ethylene capacity needed to be shut. This was based on the need to restore operating rates to 85%, a level that would enable the industry to survive.

He noted that Flint Hills and LyondellBasell have already indicated shutdown of cracker capacity and expects four to five other producers to follow. If an overseas company bought one of these candidates for closure, it would be likely to keep the plant open.

DeWitt predicted a decline in US ethylene consumption up to 2010 with operating rates based on present capacity falling to 75-77%, due mainly to a decline in exports of ethylene derivatives.

In the case of polyethylene (PE), exports from the US have grown strongly in the past two years to account for 18% of production, Armstrong noted. This has occurred as the start-up of new Middle East capacity has been delayed and US producers had stepped in to take up the shortfall.

The IPC, sponsored by the National Petrochemical & Refiners Association (NPRA), started on Sunday and finishes on Tuesday.

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By: Peter Taffe
+44 20 8652 3214

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