InterviewCracker closures inevitable in Europe - Roland Berger

12 October 2010 16:34  [Source: ICIS news]

LONDON (ICIS news)--Several European crackers face closure in the next two to three years as the next wave of new polyethylene (PE) capacity floods the region from the Middle East, a consultant said on Tuesday.

Heavy delays and teething troubles may have offered a temporary reprieve for European olefins players but the real impact will soon to be felt from all these capacity expansions, according to Arjen de Leeuw den Bouter, senior project manager at Roland Berger Strategy Consultants.

Ageing, uneconomical crackers in Europe will be unable to compete with the worldscale units that are now starting to come onstream. Those not directly back-integrated into naphtha are particularly at risk, he said.

“At least five or six crackers need to close in Europe; Italy and France would be the first candidates but also Germany and the UK,” said de Leeuw den Bouter.

European players have so far enjoyed a better-than-expected 2010, but with many major projects starting up over the next year, the worst is not yet over, he said.

“Everybody knew the petrochemical downcycle was going to happen but then we had the financial crisis that masked the fact that the ethylene cycle was postponed by all these big projects,” he said.

“We’re still on our way to the trough of the ethylene cycle – the biggest wave is still to come onstream in early 2011. That’s when we’ll reach the bottom and when we’ll see the full effects.

“The amount of tonnage that needs to be placed is very high; we’re talking about millions of tonnes. We’re all looking at China and hoping it can absorb it all – but I think that there’s too much. It’s misplaced optimism,” said de Leeuw den Bouter.

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