InterviewVIDEO: US can emerge a winner from Middle East capacity surge
18 March 2010 12:28 [Source: ICIS news]
LONDON (ICIS news)--US chemical producers can capitalise on their own advantaged feedstock position and make the most of domestic markets to ensure future prosperity, a leading consultant said on Thursday.
The forthcoming surge of Middle East capacities means that the ?xml:namespace>US will no longer be a major global exporter and will need to capitalise instead on its domestic market, Paul Hodges, chairman of UK-based International eChem, told ICIS in a video interview.
He said: “The new Middle East capacities coming on stream will result in a really major cultural change. The US has been a global exporter for many years, so the idea that the US Gulf Coast in particular will no longer be a supplier to the world will be a major cultural shift and one which will take some getting used to.”
Hodges said US producers around the Gulf Coast have already acted quickly to switch to more competitive natural gas feedstocks: “The proportion of crackers using heavy feeds has gone down from 50% to around 25% over the past year. US producers move fast when they see an opportunity. Shale gas could be an enormous opportunity. To survive in this world you need a strong domestic market and advantaged feedstock. Hopefully the gas position in the US will help producers there achieve this.”
Declining demand for gasoline could also benefit US producers, said Hodges: “US gasoline demand from refineries probably peaked in 2007 and we’re now seeing more ethanol coming into the system plus new fuel economy measures that will boost fuel economy by 42%: so we’ll see much less gasoline being used in the US.
“Hopefully this could be an opportunity: we can take distressed price light-end [feedstocks] which were being used in the gasoline market and use them to help boost the position of the petrochemical industry and its consumers in the US Gulf coast.”
Hodges urged the US chemical sector to capitalise on its advantaged relationships with domestic customers. “As well as looking upstream to optimise the position with refiners they should also look downstream to optimise positions with customers. Any downstream customers will want to buy preferentially from a local supplier. They won’t want to depend on the arbitrary nature of imports, which might come this week or next month depending on the shippers.”
He added: “US producers have this fantastic ability to turn a problem into an opportunity: that ‘can do’ attitude is very important. There are two sides to this debate. Obviously the Middle East has advantaged feedstocks, potentially the US has got that as well. But there’s also advantaged access to downstream markets.”
Read Paul Hodges’ article ‘Be a winner, not a victim’ in the 22 March NPRA issue of ICIS Chemical Business
Read Paul Hodges’ Chemicals and the Economy blogBy: Will Beacham+44 20 8652 3214
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