14 March 2013 15:55 [Source: ICIS news]
AMSTERDAM (ICIS)--Inefficient European polyethylene terephthalate (PET) plants will need to be shut down because of oversupply, a senior consultant said on Thursday.
“The market’s not getting any easier... it’s becoming much more competitive and the cost base is lowering... there might not be a good outlook in five years, either,” said Stewart Hardy, global manager for petrochemical market dynamics at Nexant ChemSystems.
“We see the need [for] some closures. [I] think there does have to be a shakeout of uncompetitive capacity, as new plants with high efficiencies are coming online.”
The consolidation will be needed because of extra capacity coming on stream in Asia, leading to material, which would previously have been exported, remaining in Europe and increasing supply in the region.
“There is a lot of capacity going into China, but not just China, elsewhere in Asia, too. Moreover, it’s displacing imports from Europe. These investments are inevitably increasing competition pressure,” Hardy said, speaking at the ICIS PET Value Chain conference, which runs from 14 to 15 March.
In 2013 Chinese capacity will be double the country's consumption, Hardy predicted.
“There is a high rate of growth... so people do tend to build big. They’ve got low fixed costs, so can afford to run at low rates for a period. But inevitably, this extra capacity does place competitive pressure on prices,” Hardy said.
Because Asian plants have low fixed costs, Hardy predicts that inefficient plants in Europe will be replaced because they cannot compete on cost.
“There’s still some small plants running in Europe, none of which have an advantage on cost other than freight rates. So there is reason to expect that some plants won’t be on-stream in five years' time, but there is new capacity [scheduled in Europe],” Hardy said.
($1 = €0.77)
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