22 December 2009 15:58 [Source: ICIS news]
By Nigel Davis
LONDON (ICIS news)--The global olefins business has been set for change for years, but now that change is becoming a reality.
Available capacity is expected to increase markedly in 2010, with capacity in the ?xml:namespace>
ICIS data suggest that over the course of next year, ethylene output from crackers in the Middle East and
The chart below illustrates the growing influence of Middle East capacity and the potentially declining importance of cracker complexes in
When including capacity additions in
Not surprisingly, the impact on high-cost producers – principally in Europe,
Citibank’s Asia-Pacific chemicals analyst estimates that the Thai court's decision takes out 14% of the expected global ethylene capacity increase, 14% of the previously expected increase for polyethylene (PE) and 7% of new capacity additions for polypropylene (PP).
But companies cannot produce robust plans on the likelihood of yet more delays. They have to take a balanced view.
Olefins makers have seen some improvement from the extremely difficult start to 2009, when demand downstream from the cracker was poor enough to force temporary shutdowns. Demand has improved, but polyethylene (PE) remains weak in North America and
The business for producers in these regions has been buoyed particularly by demand from
In its latest report, Citibank reckons that PE demand in
“There have been some production issues, although these have little impact on the market as there is more than sufficient capacity to satisfy demand,” the report states.
On both sides of the
Some believe that 2010 will be a year of two halves, with the first six months easier than later in the year as new capacities are ramped up.
Major producers have already indicated that they have planned for 2010 to be worse than 2009, given the potential supply overhang. US producers are helped greatly by favourable gas-feedstock costs in relation to oil-based naphtha, and have taken a lot of the pain already with plant closures.
There can be little doubt, however, that higher costs or poorly located production assets will come under increasing pressure in a well-supplied and relatively weak global demand environment.
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