13 December 2013 16:32 [Source: ICIS news]
LONDON (ICIS)--Petrochemical producers in central and eastern Europe (CEE) face a mid-term threat of cheap polypropylene (PP) from the US and the Middle East flooding local markets, analysts said on Friday.
The expected commissioning of around 700,000 tonnes/year of PP in Russia during 2014 could also eventually hit PP players in the CEE, with the Russians aiming to become a net exporter of the thermoplastic polymer, the Erste Group Bank and Raiffeisen Centrobank (RCB) analysts added.
“We see the risk that several US and Middle East players are currently investing into NGL-based [natural gas liquid] petrochemicals, which could dump the market with cheap polypropylene from 2016-2017,” Erste's Tamas Pletser said.
The Russian PP threat was also “completely feasible” but the growth of the PP industry in Russia might be constrained because the country is short of gasoline, meaning refineries there would generally rather invest in fluid catalytic cracking (FCC) units than in ethylene crackers to process naphtha, he added.
The difficulties facing European polymer competitiveness were highlighted earlier this year when Saudi Arabia-based SABIC decided to close two PP plants in Gelsenkirchen, Germany, noted RCB's Dominik Niszcz.
“Yes, there is a move towards [locating production in] cheaper regions,” said Niszcz.
“Overall, it may be getting more difficult to produce petrochemicals in CEE at satisfactory margins, but it is still too early to predict the impact of the Middle East players,” he added.
“Russia on the other hand may simply import less PP, meaning a negative impact on the supply-demand balance, but demand there should grow, just as it should grow in the CEE, so hopefully it will not be so disastrous for CEE players,” he added.
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