07 September 2009 17:46 [Source: ICIS news]
By Nigel Davis
Polyolefins producers globally face a period of over-supply and nothing sparkling in the way of polymer demand.
Consumption dropped markedly with the credit crunch and the recession. Recovering 2007 levels of demand will take time.
Consultants’ forecasts make miserable reading and suggest a period of plant closures and producer losses.
It calculates that global PP consumption dropped 3.1% last year (or 1.4m tonnes) from 45.5m tonnes in 2007 and will only grow by 1% in 2009.
Under that scenario consumption reaches 2007 usage levels some time in 2010.
Not so long ago polypropylene was the plastics star.
The projected low rate of consumption growth couldn’t come at a worse time. Demand growth will average 3.7% a year for the next five years, Townsend says.
But over this period an additional 10m tonnes of PP production capacity is expected on stream. It projects demand growth from 44.1m tonnes in 2008 to 52.8m tonnes in 2013.
Global average capacity utilisations will fall below 80% from 2012 it suggests – more than 17m tonnes of new capacity additions are planned between 2009 and 2013.
Rates at that level, historically, have been associated with operating losses for high cost producers. They have prompted plant closures and project delays.
It is that balance between supply and potentially only achingly slow global demand growth that will characterise business in the polymer over the coming quarters.
Under these circumstances regional differences will become more acute. High costs facilities in lower growth regions will suffer the most.
Currently markets in Europe and the
And the driving force behind demand from
The fundamentals, however, point the way.
The 400,000 tonne/year Yansab PP unit started up at the end of August with the project’s cracker running at about one-third capacity. PP exports are expected to begin around the end of this month.
Linear low density (LLD) and high density (HD) polyethylene (PE) are likely to be exported from the Yanbu-based facilities from between the end of September and the end of October.
Under current market conditions both established producers and the operators of new facilities might be expected to edge ahead cautiously. No one wants to see prices collapse. Markets are weak and, if current studies are correct, likely to remain so for some time.
Four of the big new PP capacity additions have been due on stream this year. So players in this market are likely to have an early picture of the ultimate impact of the combination of increased volumes and weak demand.
The massive capacity additions are being made at a particularly difficult time and will help change the face of the industry. Uncompetitive capacity, particularly in the big, established producing regions of the
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