03 March 2010 00:00 [Source: ICB]
In the wake of the global economic meltdown, most chemical companies have begun a series of layoffs that may finally be ending
|Citing low returns, US refiner Valero shut its 235,000bbl/day oil refinery in Aruba in August 2009. The plant was estimated to employ about 15% of the Caribbean island's population|
Wired New York
The ACC follows the National Bureau of Economic Research in considering the start of the recession to be December 2007. Since then, the US chemical industry has lost 66,000 jobs, or 7.7% of employees.
The US and Western Europe have been the hardest hit, with commodity chemicals having the greatest proportion of job losses, notes US-based Polymer Consulting International (PCI).
The worst may be over: most companies have already cut back significantly because of the economic crisis.
Freeport, Texas, US, where Dow Chemical closed a 680,000 tonne/year styrene and 400,000 tonne/year chlor-alkali plant in 2008. Several other plants there are scheduled to be closed
However, warns Robert Bauman, president of PCI, "Most of us in the industry are waiting for the other shoe to fall."
That shoe is the impact of the new capacity under construction in the Middle East and China.
"While some capacity has started up, the impact has been minor due to stronger-than-expected demand in Asia and the shutdown of capacity, primarily in Europe and the US," says the consultant.
The new capacity is expected to start up in the next 12-18 months. When this happens, notes Bauman, there could be another price and margin drop as current operating rates decline as well.
"If this is severe, then additional layoffs could occur, especially if additional plants are shut down," he says.
With most companies now running lean, the magnitude of any potential layoffs will be much lower than what has already occurred in the industry.
A potential alternative scenario that PCI notes involves start-up delays and operating problems staggering the impact of the new capacity and it is absorbed via improving global economies.
While the North American and European chemical markets are stagnant or contracting, expansions and construction in Asia and the Middle East are driving up employment in those regions.
However, cautions PCI's Bauman, petrochemical production is not labor intensive.
"New plants are bigger and are more automated, requiring [fewer] people to run them," he says.
"Moreover, it is not a fluid job market: People working in Europe and North America are not likely to transfer to Asia or the Middle East."
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