InterviewAPIC '09: Exxon expects soft chem market through H2

15 May 2009 05:03  [Source: ICIS news]

By Bohan Loh and Peh Soo HweeExxon

SEOUL (ICIS news)--US oil and chemicals giant ExxonMobil expects olefins and polyolefins prices to be under pressure through to the second half of the year as more supply will come in due to capacity start-ups in China and the Middle East, while demand is still weak, a senior company executive said on Friday.

“The volume coming on in the next six to nine months is in the middle of a demand-side-recession.  It’s hard to see how it doesn’t work out in a softening of the market,” said Bryan W. Milton, vice president of the company’s basic chemicals unit, in an interview with ICIS news on the sidelines of the 9th Asia Petrochemical Industry Conference (APIC ‘09).

Petrochemical facility start-ups in the Middle East and China throughout the year would add an estimated 10.4m tonnes of ethylene capacity, according to data from global chemical intelligence service ICIS pricing.

Business advisory firm KPMG International had recently projected ethylene capacities in the Middle East to increase to 33m tonnes/year by 2012 and for the combined polyethylene and polypropylene capacities in the region to rise to 30m tonnes/year.

Prices of Asian ethylene had rallied 22% since the beginning of the year through April but values have stabilized or turned softer in the past three weeks based on ICIS pricing data as demand has yet to completely recover from the slump in the fourth quarter of last year.

While there was growing optimism that the global economy had seen its trough, some market players doubt that recovery would soon take place.

“It’s way too early to say [the] recession is over,” Milton said.

“Past recessions are always a good measure, although this one is unique. When we came out of past recessions, it was a rocky road,” he said.

“I think we will continue to see that as we go through the coming year,” Milton said, adding that no one was “insulated from the storm that is going on now.”

ExxonMobil Chemicals had recently reported a 66% decline in first quarter earnings due to lower volumes and unfavourable currency effects.

“We’re having a challenging time just like our customers and suppliers,” he added.

Despite the downturn Milton said Exxon’s projects in Singapore, Fujian and Qatar were all coming along.

“The first barrels of crude oil arrived at the [Fujian] complex a few months ago, and we are on schedule to commence petrochemical production this year,” he said.

Similarly, Exxon is holding talks with its joint venture partner Qatar Petroleum for a petrochemical complex in Ras Laffan.

“We’re talking about derivative products. Debates continue and discussions are very positive,” Milton said.

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By: Bohan Loh
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