04 November 2009 17:09 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--Forecasting with confidence is not a phrase one is likely to hear in the current climate.
Visibility is so poor at the macro level that any drill down to individual businesses and segments is difficult in the extreme. But the trend is positive, away from the trough.
The fourth quarter may be seasonally slow. Many wait for firmer indications of the possible course of demand and business in the early part of 2010.
Polymers demand, for instance, remains well down on last year, and could be squeezed further in 2010, depending where you are. But just look at ?xml:namespace>
“Right now, through November, our order book is pretty much full with these export opportunities,” said COO Ed Dineen.
Those exports have buoyed LyondellBasell and others through most of this year. The fear a month ago was that
But as the LyondellBasell numbers show, September held up well compared with August despite what proved to be a temporary drop in exports.
“We’ve seen PE demand - particularly in
At the start of the year, LyondellBasell, which has its
About 60% of its polymer segment earnings come from PE, 15% from polypropylene (PP) and 25% from advanced plastics. September 2009 polymer earnings were slightly higher than those for the same month last year.
The LyondellBasell numbers, and the near term outlook are encouraging, suggesting that China polymer demand might hold up longer than at least some had feared.
Concerns over product going into inventory appear to have been misplaced. BASF said on 30 October that it had not seen any PE inventory build up in
The heat has come off the
That engine for growth will be sorely needed next year as globally polyolefins seek to gain ground on 2009.
The view from the
Volumes in Europe are weak and stocks are at a record low, said one producer. Crude and naphtha costs are high but producers simply cannot push prices higher because the demand (for polyethylene and to a lesser extent, for polypropylene) is simply not there.
Producers in Europe and
European and US producers particularly have to be concerned about the extended trough that is likely to be brought about by the new capacities. Polyolefins operating rates appear stuck at a low level. The fourth quarter looks difficult, as does the first few months of 2010 at least.
The business, as industry executives have pointed out in recent months, has its own ‘U’ shaped curve to get through. In a worse case, the recovery could be dragged through an extended ‘L’.
“We’ve come to a new place in polymers,” said LyondellBasell’s global polymers head, Anton de Vries, in early October. The company does not expect the operating environment to get better next year, and fears it could worsen. Supply/demand balances at least point that way.
This has been an extremely difficult year for polymer makers and despite a modest upturn its does not look as though the business is going to get any easier, or, rather, much more profitable in the short to medium term.
The export business is hugely welcome but cannot supplant a base load of more local domestic demand. Producers have yet to determine, or project, a true level of demand following the slump.
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