APIC ’10: Global petchems brace for supply-side downturn - CMAI

13 May 2010 16:17  [Source: ICIS news]

MUMBAI (ICIS news)--Global demand for petrochemicals has started to recover from the slump, in line with the pick-up in retail sales and industrial production, but industry players are bracing themselves for a supply glut that may again strain prices, an industry expert said on Thursday.

“We’ve had the demand side of the downturn, but the supply side of the downturn - the impact of that is still to hit,” said Tony Potter, director for Middle East at CMAI in a presentation at the 2010 Asia Petrochemical Industry Conference 2010 in Mumbai.

In a good year, ethylene demand grows at an average of 5m tonnes annually, less than half the 12m tonnes of capacity that was expected to come on stream this year, said Potter.

From late 2008 through the first quarter of 2009, the petrochemicals industry had been hit by a “global restocking”, wherein demand collapsed and product prices plummeted, but the building of new capacities had continued.

From Asia alone, a total of 7m tonnes of capacity would come on stream this year, 4m tonnes of which would be from China, said Potter.

In the Middle East, some 9m tonnes of capacity would be added but CMAI was factoring in some delays.

Only those projects still in the planning stages were affected by the recession, which would slow the capacity build-up a few years from now, Potter said.

“The good news is that the consumers are coming back. We’re on a very positive trend,” Potter said.

China, the biggest importer of petrochemical products in Asia, had continued to churn in strong production numbers since the start of the year.

“But we’re not out of the woods yet,” said Potter, citing that risks remained and that an industry turnaround may just start in 2013.

The current situation requires further capacity rationalisation, with some 18m tonnes of ethylene capacity needing to be shut by 2012, Potter said.

So far, 3m tonnes had been taken out in North America.

APIC takes place in Mumbai from 13-14 May.

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By: Pearl Bantillo
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