InterviewPolypropylene prices to decline long term - consultant

05 May 2010 23:08  [Source: ICIS news]

By Ivan Lerner

NEW YORK (ICIS news)--Polypropylene (PP) prices in the US and Europe would continue to decline in the long term as operating issues are resolved and imports increase, a consultant said on Wednesday.

The PP pricing trend “will clearly be downward”, said Robert Bauman, director of Polymer Consulting International (PCI).

“Demand growth will continue to be high in developing regions, and demand recovery will occur in developed countries as economies improve,” he added

But extra capacity would be an issue, exerting “strong downward pressure on prices,” he said. “The only question is when - one month, three months, six months?”

Global demand was being driven by Latin America, China and India. Among other things, Chinese and Indian automobiles tended to use an “above-average” amount of PP, he said.

A key factor for US and European PP producers would be the ability to maintain high operating rates by exporting surplus capacity, said Bauman.

As the economies of developed countries improved, the severe drop in demand caused by the recession may lead to a short-term burst of demand, with growth rates reaching 5-10% for one to two years, followed by a return to the pre-recession trend of 2-4%, according to the consultant.

China and India would be at the high end of the 5-10% growth projected for developing countries, but this may be tempered by the 16m tonnes/year of new capacity that was expected to come on stream in the 2010-2014 period. Roughly 7m tonnes of new capacity would come from the Middle East, and 3.5m from China, Bauman said.

Middle Eastern PP has had some issues regarding the quality of its PP, but those concerns “are temporary depending upon the country,” said Bauman. “Every new plant in the Middle East has experienced delayed start-ups and start-up problems.”

Not being a low-cost producer, China would continue to be a net importer of PP, “albeit at lower volumes”, he said.

China did have the infrastructure in place, however, to become a net exporter as its new PP plants start up, the consultant added.

With all the excess PP capacity coming on globally, “China could become a battlefield”, said Bauman, with a key issue being whether the Chinese government would impose tariffs on imports to protect its investments.

“If this occurs, exports from China will be lower, and the exports targeted for China… will have to find alternate destinations,” he said.

The latest spot prices for US-based PP were 64-65 cents/lb ($1,411-1,433/tonne), and European PP was selling for €1,200-1,230/tonne, ($924-947/tonne) according to ICIS pricing.

For more on polypropylene visit ICIS chemical intelligence
To discuss issues facing the chemical industry go to ICIS connect


By: Ivan Lerner
+1 713 525 2653



AddThis Social Bookmark Button

For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.

Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.

Printer Friendly