08 December 2010 17:54 [Source: ICIS news]
By Nigel Davis
But as with almost all chemicals makers, it has been the demand side that has presented the greatest uncertainty.
This year, the company has seen welcome volume growth and managed to lift margins. Specialty polymers have done well in Asia, as
Polypropylene was bumping along in
Polyethylene has not fared as well in 2010 although volumes and margins have improved as olefins costs have fluctuated.
The company said last week that overall, positive business conditions continued into October but that it expected some seasonal decline in a current quarter that typically is weaker than the second or third.
On Tuesday (8 December) company executives were much more up-beat about future prospects - although they were talking to investors.
”We think the [ethylene] up-cycle is finally in place,” Bob Patel, the head of olefins & polyolefins outside of
The highly-anticipated cyclical trough was finally upon the sector, he admitted, even though, in his words, “it’s been a great year”.
LyondellBasell is about two years ahead in its thinking, however, and says now that 2010 capacity increases can be absorbed in 2011 and 2012.
Few ethylene capacity addictions have been sanctioned after 2011 and it sees a much improved global ethylene supply/demand balance between 2013 and 2015.
With a better costs structure and an improved asset base, LyondellBasell should be in a position to capitalise on stronger industry fundamentals.
“The company has gigantic leverage to this uptick” CEO Jim Gallogly said. In this business, when markets start to turn, cash and margins are generated very quickly.
LyondellBasell has had to work hard on the fundamentals through its difficult period in US Chapter 11 bankruptcy protection and subsequently.
Costs have to go down every year, Gallogly says, bringing his operating experience from Chevron Phillips to bear on one of the world’s largest chemical companies.
Capital discipline is tough - there is less than $1bn a year to spend. About $1bn (€750m) in fixed costs has been taken out of the business since the end of 2008. The post-Chapter 11 capital structure means that annual interest payments have been cut by $1.7bn.
For some time, LyondellBasell has talked about its “back-to-basics” strategy. Not surprisingly that focuses on operational excellence, cost reduction and revenue enhancement. LyondellBasell has been managing its portfolio of assets, particularly in
A significant amount of polypropylene production capability has been taken out with some added in
LyondellBasell says that close to 90% of its European polyolefins production assets are now in the second or third quartile fixed cost position compared with 57% in 2008. But more is likely to be done to raise the operating capability of the assets that remain.
“This is a new company and a company with a bright future,” Gallogly says. In three to four years he expects to have the company operating in a very different petrochemicals world.
($1 = €0.75)
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