Petchems cycle will not recover before 2011 - Deutsche Bank

21 May 2009 10:28  [Source: ICIS news]

Quick recovery not expectedLONDON (ICIS news)--The global petrochemicals cycle is unlikely show any meaningful improvement until 2011 as new capacities in emerging regions delay potential recovery, Deutsche Bank said on Thursday.

“While the first half of this year may prove to the worst point in this current cycle – due to severe customer de-stocking – trough like conditions are likely to remain through 2010 as capacity additions in both China and the Middle East continue,” said analyst Glynis Johnson in a note to investors.

Due to the raft of large-scale petrochemicals and plastics production set to start up, Deutsche Bank did not expect the petrochemicals cycle to reach its peak until after 2013.

The US and Europe were seen as the least competitive regions during the downturn, but Asian producers outside China were also expected to face tough conditions.

Producers based in countries like Japan, South Korea and Taiwan, which rely on exports to China, were expected to face competition from a flood of cheap product from the Middle East targeting the Chinese market.

Although the ethylene cycle is historically used as an indicator for most upstream petrochemical products due to its association with large-scale investments, products relatively removed from this may prove more resilient, Deutsche Bank said.

“With the next downturn driven by Middle Eastern and Chinese investments – which are often only focused on certain product chains – the correlation of some products with ethylene is less clear,” said Johnson.

“Some products have the potential to recover more rapidly from the current troughs,” added Johnson, giving polyurethanes, nylon, styrene butadiene rubber (SBR) as examples.

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By: Mark Watts
+44 20 8652 3214

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