Short-term US outlook foggy, long-term is good - chem executives

08 September 2010 23:11  [Source: ICIS news]

HOUSTON (ICIS)--The outlook of the US economy and its regulatory regime made some petrochemical executives queasy about the near future, although they were more positive about the next decade, they said on Wednesday.

The deepest trough for the US petrochemical industry in 25 years brought on by the recession has been made worse by new plants coming on line in Saudi Arabia and China, a trend that Shell Chemical's Aamir Farid called "the stampede to the East."

Farid, general manager of the Shell unit, said additional global capacity is just part of the problem. The other part is a wavering US economy.

"It's not as stable as we would like it to be yet," said Farid, who was speaking at the Petrochemical Maritime Outlook Conference, held in Pasadena, Texas by the Economic Alliance Houston Port Region.

Houston is the petrochemical hub of the US and one of its largest ports.

Another petrochemical giant, ExxonMobil, expects no growth in demand over the next year. "Profitability will remain challenged in the near future," said Mike Zamora, plant manager of ExxonMobil's olefins unit in Baytown, Texas.

The Obama administration's push to increase regulation of the industry, particularly by strengthening the Environmental Protection Agency (EPA), also is compounding the industry's worries.

"We really wonder where this is going," Farid said.

The Shell official added that one of the biggest immediate issues facing the industry is the dispute between the state of Texas and the EPA over the state's clean-air permitting.

The Texas Commission on Environmental Quality (TCEQ) and the EPA have been locked in a bureaucratic battle since late June, when the federal agency said the TCEQ's flexible permit programme was illegal under the US Clean Air Act.

Steve Hazelwood, director of Texas Government Affairs for Dow Chemical, said it would be "disastrous" for the industry if Rick Perry is not re-elected governor in November.

Perry, a Republican, has been an ardent foe of the EPA in its struggle with the state and also an outspoken critic of the Obama administration.

Farid said he was hopeful the dispute would be resolved soon - "in months, not years", he added.

"As long as we know where we're going, it's OK, we have a bunch of smart people, we'll figure it out," Farid said. "It's just the uncertainty that's slowing us down."

Zamora said the near-future for the US petrochemical industry may be uncertain, but the next decade and beyond should see steady growth. ExxonMobil expects 5% annual growth over the next 7-8 years, due to the ramp-up in Asia.

"Long-term, the benefit is much more positive," Zamora said.

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy
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By: Lane Kelley
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