New Mideast, Asia crackers to bring C2 overhang - consultant

25 March 2010 18:32  [Source: ICIS news]

Polyethylene pelletsHOUSTON (ICIS news)--The start-up of new crackers in Asia and the Middle East will result in a serious capacity overhang from the second half of the year, a consultant said on Thursday.

A total of 7m tonnes/year of new Asian ethylene capacity will become available by the end of the year, with another 4m tonnes/year coming on stream in the Middle East, said Mazlan Razak, vice president, olefins and derivatives, Asia, DeWitt. He was speaking at DeWitt’s 35th World Petrochemical Conference.

Operating rates are expected to drop steeply to 85% in Asia compared with 93% in 2009. Razak said he expects future operating rates to stay low while demand slowly picks up to absorb the new capacity.

Razak added that high-cost producers will have to assess their positions in view of competition from Middle Eastern ethane-based units as well as new world-scale naphtha crackers. Smaller naphtha crackers may face gradual shutdowns and non-integrated derivatives may also be shut on a permanent or temporary basis.

However, Razak said he expects Asian demand in 2010 to be good, with China and India expected to lead the recovery. He noted that the Chinese government is trying to slow the pace of growth to 8% this year after GDP grew a "blistering" 10.7% in the last quarter of 2009.

In the Chinese polymer industry, recovery is reflected by the strong surge in demand in 2009, Razak said.

Polyethylene (PE) consumption in China grew by 37.5% in 2009 to reach 15.6m tonnes, following a contraction of 1.7% in 2008.

Demand for polypropylene (PP) in China also boomed in 2009, registering 29% growth to 13.4m tonnes after a dip of 2.7% in 2008.

Restocking played a part in this growth, especially after the massive destocking at the end of 2008, Razak said. Demand was also generated by the government stimulus package propelling increased consumer spending.

He also noted that relaxation of credit also brought many new traders or speculators to the market.

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