29 March 2010 12:07 [Source: ICIS news]
By Malini Hariharan
MUMBAI (ICIS news)--The global petrochemical industry is in for a difficult year given a slew of new capacity additions, but conditions are likely to improve in 2011 as volumes from new plants are absorbed, a PTT Chemical senior executive said on Monday.
“Global ethylene capacity would increase by 10m tonnes this year while demand increase will not be even half of that,” Veerasak Kositpaisal, president and CEO of the Thai petrochemicals major.
Similarly, polyethylene (PE) capacity additions would be close to 5m tonnes and demand growth would absorb only 2m,” he added.
Kositpaisal pointed to “good signs on the demand side” as the world economy, led by ?xml:namespace>
“But when you add the numbers, 2010 will be around the bottom of the cycle,” he said.
However, the industry should also be prepared for delays in commissioning of new plants and operating issues.
“The projects, especially those in the
He pointed out that feedstock was also an issue in the
“At the same time those producers with high feedstock costs are facing difficulties; they have had to shut down plants,” Kositpaisal said.
He expected the spread between naphtha and high-density polyethylene (HDPE) prices to remain at around the $500/tonne (€375/tonne) level this year.
“At that level naphtha crackers can survive but it is not healthy,” he said.
He was, however, optimistic about PTT Chemical’s prospects as 90% of the company’s feedstock slate was based on gas, with naphtha making up the balance.
“Our gas feedstock is very competitive,” he said.
The company secures gas from its parent PTT on a profit-sharing concept.
Under this system, the market price of high-density polyethylene (HDPE), the cost of investment and operating costs were all taken into account in arriving at a net margin that is shared between the two companies, said Kositpaisal.
PTT Chemical would see revenue growth this year as it has commissioned a new 1m tonne/year cracker and some downstream projects at Mab Ta Phut in
Full operations at the cracker were expected later in the year once the new gas separation project of PTT started operations, said Kositpaisal.
Work on this project, along with the other projects of PTT Chemical, was affected by a Supreme Court ruling last December suspending 65 projects at the Mab Ta Phut industrial estate.
The court has since exempted a few projects and the number of suspended projects is now down to about 50, according to local media reports.
Kositpaisal was optimistic that the Thai government would have a legislative framework in place by the middle of the year paving the way for the projects to start up.
While 2010 was likely to be a difficult year for the industry, Kositpaisal anticipated better years ahead.
“If you look at new capacities, there have been very few announcements. Even if a company announces today, it is going to take four-five years to complete a plant. So I see good years,” he said.
On PTT Chemicals' sales strategy, Kositpaisal said the company would maintain its focus on the export market, especially
“We are currently exporting about 50% of our production in the polymer business and
“In future if you include the new capacities coming up in
Kositpaisal also saw an opportunity for PTT Chemical to expand its presence in Asean (Association of Southeast Asian Nations) following the implementation of a free trade pact in the region from 1 January which has brought down tariffs on many products, including polymers, to zero.
“We have a significant participation in
He was positive on growth prospects in
“Even during the crisis in 2008 and in 2009 we did not see a drastic drop in packaging [demand]; we still see growth of 3-4%. And
This was expected to support Thai PE demand growth of 3-4%/year, he added.
Like many of its Asian counterparts PTT Chemical was also looking to expand its presence in speciality grades of PE.
“We have a programme to work together with customers to develop new grades; some grades are already in the market. Now only 5% of our volume comes from speciality grades but we plan to increase the share,” said Kositpaisal.
PTT was also looking at producing metallocene grades at its new linear-low density plant that was commissioned earlier this year.
“We have a plan to make it; we want the plant to run smoothly first,” he added.
($1 = €0.75)Read John Richardson and Malini Hariharan’s Asian Chemical Connections blog
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