07 October 2009 16:50 [Source: ICIS news]
By Nigel Davis
Polyethylene (PE) and polypropylene (PP) demand dropped in 2008 and is expected to fall in 2009 between 5% and 10% from those year-ago levels, LyondellBasell believes. Asia continues to be a bright spot and over the longer term the company still sees relatively healthy
But gone are the days when the market was expanding at 8%, 9% or 10%.
“We have very moderate growth rates in our plans for polymers,” de Vries said in an interview with ICIS news on the sidelines of the 43rd annual European Petrochemical Association (EPCA) meeting in
This has been a year of turmoil for LyondellBasell and other producers in the industry. But the
The third quarter started relatively well, helped along by exports from the
“The business environment is not going to get better for a company like us,” de Vries said, looking to next year.
“With more capacity coming on stream in the
The sector will get a better idea of where real demand is during this quarter, he believes.
Product pipelines have emptied and filled again since the fourth quarter of 2008.
LyondellBasell used to run its polymer businesses with at least 35 days of PP and PE stocks. It has run for the past six months and more with stocks down to 20 days.
This is not the easiest of places to be but illustrates the fact that during this downturn suppliers and customers have been forced to do things differently. The trend is apparent across other chemicals markets.
There just isn’t the working capital available to run businesses in the way they were being run. Companies of every sort are doing all they can now to preserve cash.
Firms are going into the fourth quarter with low stock levels and more used to running product lines tightly. Cashflow management is important through myriad product chains.
This control will not be relaxed until some supply/demand tightness returns, and in polyolefins particularly, that is likely to be some time off.
The output from large, new, low-cost production facilities in the
Stronger margins will only be made when a more favourable supply/demand balance for producers is achieved.
The threat primarily is to commodity grade business, but new plants are coming on stream that ultimately have the potential to make higher added-value polymers such as pipe-grade plastics. It is difficult to imagine operators not aiming to penetrate such markets when they have the ability to do so.
Producers established in Europe and
They are also having to deal differently with customers who might only be prepared to accept modest step-wide price increases given the parlous state of their own downstream demand.
The arrival of material from new plants in the
The true nature of the impact of the capacity-driven trough for the business, however, particularly in the European market, has yet to be realised.
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