05 March 2010 17:36 [Source: ICIS news]
By Nigel Davis
Only if it were that easy. The pundits are in full voice. Plants need to close, they say. Europe, northeast Asia and North America will be hit hard by the coming wave of
Times will be tough. More new production facilities are being built in
If you have operations in the slower growth regions, just what do you do?
Well, perhaps, you don’t shut them down, which was a point made in the ICIS Asia Chemical Connections blog on 25 February.
Significant new volumes of petrochemicals should become available over the next couple of years, but after 2011 the number of planned new additions starts to slow.
You may feel virtuous in 2014-2015, possibly around the time of the next olefins chain upturn, but you will have lost business, and the chance to make more money.
Look at past shutdowns in
This time around, is the situation much different? Operating rates are low, plants are losing money and the prospects for European producers are bleak. But none of this will necessarily force cracker closures.
Consultants have looked at the global and European cracker-cost curves and determined which crackers they believe should be closed. It is not difficult to perform a similar exercise and identify units in
Output from the Middle East and
Boyle calculates that net imports of ethylene-based product into
Boyle forecasts cracker operating rates of around 70% when the capacity glut hits. The new producers in the
Not so perhaps for their counterparts in
Options are few, although social issues are likely to become increasingly important as times get harder. In
The argument goes that
Companies have planned for the inevitable but suffered shock from the financial crisis and the subsequent global economic downturn. Margins are being recovered, but the outlook remains uncertain to say the least.
Few will want to take on the additional burdens now of plant closures, even if the fundamentals suggest that they should.
An extended downturn and a capacity glut will hit the European petrochemicals sector hard.
Companies have had plenty of time to prepare for the latter. It still depends on whether the former knocks them for six.
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Asian Chemical Connections