Ethylene market weak in 2010 on additional capacity - Citi

18 December 2009 16:52  [Source: ICIS news]

LONDON (ICIS news)--Next year will be relatively weak for the ethylene market as an expected global capacity increase of 8% will negatively impact high-cost producers mainly in Europe, Japan and Korea, investment bank Citi said on Friday.

The extra capacity, which would come from the Middle East and Asia, was expected to have less of an effect on US operating rates due to its natural gas feedstock advantage, compared with Europe and Asia’s oil based ethylene capacity.

Citi also said that the ethylene cycle would be buoyed in the short term from already announced delays. For example, Thailand's Supreme Administrative Court delayed new capacity by six months over environmental concerns.

Looking at the global chemical industry in 2010 as a whole, the bank expected revenues to be up year on year and to continue from the recovery seen in the fourth quarter of 2009. However, Citi added that improvements would only be moderate and that it did not expect a strong rebound.

“We continue to like stocks that can grow earnings despite the shape of the economic recovery. Among cyclical stocks, the only name we continue to favour is Dow, given its early-cycle Rohm & Haas assets, eventual commodity recovery by 2012 and de-leveraging,” Citi said in a statement.

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By: Franco Capaldo
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