The world this week

21 May 2012 00:00  [Source: ICB]

ASIA

ASIA POLYOLEFIN PLAYERS FEAR REPEAT OF 2008
Last week's steep decline in Asian polyolefin prices has left producers and traders wondering when the market will bottom out. Polyethylene (PE) pricing was down by $90-130/tonne (€71-103/tonne), with polypropylene (PP) $70-130/tonne lower for the week ending 11 May, following mainly flat or declining prices since late January. "I have a dreadful feeling that this could be a repeat of 2008," said a marketing executive with a global polyolefins producer. "Back then, the Chinese didn't buy for 4-5 weeks ... and it is now 3-4 weeks since Chinese buying almost completely seized up."

WORLD REQUIRES NEW 40M TONNE/YEAR C2 CAPACITY
Around 40m tonnes/year of new ethylene (C2) capacity will be needed to meet global demand growth in 2012-2020, a chemicals industry consultant says. "The global economy is expected to recover from the current recession due to the continuing growth seen in emerging markets, hence the need for this new capacity," said Nexant Chemsystems consultant Lee Fagg, speaking in Kuala Lumpur, Malaysia, ahead of the 34th annual Asia Petrochemical Industry Conference (APIC). Another important development is the big shift towards the use of lighter feedstocks for olefins.

GLOBAL PETROCHEMICAL MARKET TO PEAK IN 2016
Global petrochemical profitability is poised to peak by 2016 as demand growth continues to outpace supply, a consultant says. "We are in the midst of a multi-year uplift, with weighted average EBIT [earnings before interest and tax] for base chemicals and plastics expected to peak by 2016," said Mark Eramo, vice president of research and analysis at US-based consultancy IHS Chemical, at APIC. Profitability will average $200/tonne at the peak. Global demand is expected to expand by around 4.4%/year to reach 1bn tonnes by 2020, says IHS.

PPG EYES GROWTH IN CHINA PACKAGING COATINGS
US chemicals group PPG Industries is targeting more than 10% growth in sales of its packaging coatings in China this year and over 2.5% globally, Douglas Pegg, vice president of PPG packaging coatings, says. China, the world's biggest consumer of beers, currently has only 5-6% of its beers packaged in aluminum cans. The percentage is now 50% in the US, 25% in Vietnam and 35% in Brazil, according to Pegg.

CHINA CUTS RESERVES TO BOOST AILING ECONOMY
China has cut its bank reserve requirement for the second time this year, in an effort to boost domestic economic activities amid continued weakness in external demand. A 50-basis point cut in bank reserve requirement ratio (RRR) was revealed by the People's Bank of China, the country's central bank. The reduction in RRR would free up yuan 400bn-500bn ($63bn-79bn) in funds for lending to ease a domestic crunch currently prevailing in China, analysts said.

ASIA LEADS CONTINUING GROWTH IN POLYOLEFINS

Polyolefins is "still a growth story", with Asia at the lead, according to consultant Alastair Hensman of Nexant. China matters hugely in the world polyolefins market, with its estimated economic growth of 7-8 %, but demand growth in Europe and the US will continue to be slow. "In Asia, nobody dares shut down a cracker. Everyone is sitting there thinking 'I'm not making money but I will run the plant because there will be demand growth'," says Hensman.

AMERICAS

REPSOL SUES ARGENTINA OVER YPF SEIZURE IN US
Repsol YPF, the large Spanish oil company, has filed a class-action lawsuit against Argentina for seizing control of YPF, in which Repsol held a majority stake. The lawsuit, filed in a US District Court in Manhattan, is part of Repsol's effort to recover damages from Argentina over the expropriation. "In this action we are seeking compensatory damages and will continue to aggressively pursue the interests of our shareholders," a Repsol spokesperson says.

US CHEMICALS LEADER SEES BETTER GROWTH AHEAD
A top US petrochemicals industry official says that increasing supplies of natural gas will trigger a rising tide of energy and materials abundance to benefit the chemicals sector and all domestic manufacturing. Cal Dooley, president of the American Chemistry Council (ACC), said at a natural gas industry meeting that "we now have a tremendous, once-in-a-lifetime opportunity in the US due to the increased supply of natural gas. No industry more than chemicals is better positioned to capitalise on this," he said.

BUYERS SURPRISED BY NOVA'S EPS SALE
Buyers in the North American expandable polystyrene (EPS) market were surprised at news of the sale of NOVA Chemical's EPS business to Canada-based PFB. NOVA will sell its performance styrenics business to PFB, including its EPS and ARCEL resin products. Many market participants were not aware that NOVA had plans to sell. Others were surprised that an EPS molder would have the means to take over one of North America's largest EPS suppliers.

EUROPE

NOVAPEX TO DOUBLE IPA AT ROUSSILLON, FRANCE
French phenol and acetone producer Novapex plans to double isopropanol (IPA) capacity from 40,000 tonnes/year to 80,000 tonnes/year at its facility in Roussillon, France. The project will be constructed in two phases, with the first expected to be completed in 2013. A company statement said the expansion would boost its position in high-end market segments. Novapex's Roussillon IPA facility started production in January 2010.

EVONIK OPTIMISTIC ON 2012 OUTLOOK, DESPITE DECLINE
Evonik is optimistic about its full-year 2012 outlook, despite a year-on-year decline in first-quarter sales and net income, the company's CEO, Klaus Engel, says. He said the dip in business in the 2011 fourth quarter did not continue into the first quarter of this year. "On the contrary, there was a perceptible uptrend," Engel said. Evonik's owners are considering an initial public offering, with a final decision expected later this month.

INEOS HDPE PLAN 'SHOWS POOR PLANT ECONOMICS'
INEOS Olefins & Polymers' plan potentially to divest two of its high density polyethylene (HDPE) plants in Europe has drawn the polymer industry's attention to the high-cost, slow-growth dynamics of non-integrated plants in Europe, sources say. "Those sites are high-cost: you need to invest heavily for these big volumes, and if you are not integrated, you have to pay for ethylene and you cannot get integrated margins," said a polyethylene (PE) pipe producer. INEOS's businesses at Rosignano, Italy, and Sarralbe, France, which could be put up for sale, represent 37% of the firm's nameplate HDPE capacity in Europe.

PP DEMAND IN TURKEY TO RISE TO 2M TONNES/YEAR
Automotive sector growth is set to push polypropylene (PP) consumption in Turkey up from 1.62m tonnes last year to an estimated 2.19m tonnes/year in 2014, Faruk Erkoc, chairman of Penta Petrokimya, says. "Turkey exported 20m cars last year, leading to increased demand for PP that is set to continue," he said at the ICIS World Polyolefins Conference. PP imports grew to 1.48m tonnes in 2011, while local production was a mere 144,000 tonnes.

RUSSIA'S ACRON BIDS FOR CONTROL OF POLAND'S ZAT
Russian mineral fertilizer producer Acron Group is offering to buy 66% of Poland's largest chemical group by revenue, Zaklady Azoty Tarnow (ZAT). A source at nitrogen fertilizer, caprolactam (capro) and nylon 6 (polyamide 6) maker ZAT said the company's initial feeling was that the bid, priced at zlotych 36 ($10.50, €8.25) a share, was "on the low side", even though Acron ownership might give the group access to "some of Russia's huge resources of cheap raw materials."

MIDDLE EAST & AFRICA

IRAN MEG PRODUCTION AT 10% SINCE START OF MAY
About 90% of Iran's monoethylene glycol (MEG) capacity has been shut since early this month, as Farun Chemical and Marun Petrochemical halted operations at their plants, which have a combined capacity of 845,000 tonnes/year, because of shipping issues, market sources said. "They have to shut [production] because they cannot find vessels to ship out the material," an industry source said on the sidelines of APIC. "Ship owners would not like to take the huge risks to move these cargoes without insurance." Farsa Petrochemical and Marun Petrochemical were not immediately available for comment. Effective 1 May, the EU banned the issuance of protection and indemnity (P&I) insurance to major ship owners that deal with large quantities of Iranian liquid chemicals, including Norway's Odfjell and Malaysia's MISC, the source added.


By: Will Beacham
+44 20 8652 3214



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