Global PP operating rate will drop by 2010 - Basell

22 May 2007 15:52  [Source: ICIS news]

ANTWERP, Belgium (ICIS news)--The global operating rate for polypropylene (PP) will drop five basis points by 2010 as the surge in new capacity in the Middle East will outweigh demand, said Basell’s senior vice president of polyolefin products on Tuesday.

 

Global capacity growth of 6.3% was expected to outpace a 5.4% demand increase putting pressure on operating rates, said Yves Bonte, speaking at the 4th World Olefins Conference in Antwerp, Belgium.

 

Global operating rates were expected to fall to 87% in 2010 from 93% this year, almost as low as the trough in 2001.

 

The Basell spokesman predicted that the Middle East would be the only regional net exporter of both polyethylene (PE) and PP by 2011.

 

The region is set to double its share of global PP capacity to 14%, with 3.5m tonnes/year of capacity coming on stream in Saudi Arabia alone.

 

The Middle East is also on track to double its global PE capacity share to 21%.

 

Over 4m tonnes/year of new PE capacity is expected to come on stream by 2011 in both Saudi Arabia and Iran, with a total of 11m for the region.

 

The cash costs of the olefins based on advantaged gas in the region are considerably lower than European or Asian naphtha-based olefins.

 

“Propylene (C3) and ethylene (C2) are far more expensive to transport than PP and PE; integration is the model for the future,” said Bonte, adding that most of the value was being added in the feedstock-olefins step rather than the olefins-polyolefins process.

 

Bonte said the feedstock cost advantage in the Middle East would remain even if the price of crude were to half.

 

“Even in a heated shipping market, it would still be beneficial to ship polyolefins from the Middle East to other parts of the world,” he added.

 

Capacity has been well above demand in recent years and in North America and Western Europe there has even been some negative annual demand growths, said the Basell spokesman.

 

Although growth in Chinese demand would remain strong, it was not thought to be enough to absorb the huge capacity increases outside Asia.

 

“We do not see China as the infinite sink for polyolefins, despite what many people think,” said Bonte.

 

Basell is the world's largest producer of PP, a leading supplier of PE and catalysts, and a global leader in the development and licensing of PP and PE processes.

ICIS Copyright © Reed Business Information 2009

Author: Mark Watts
+44 20 8652 3214

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