The petrochemical supply tsunami is on its way!

BY JOHN RICHARDSON/SINGAPORE

Tsunami.jpgIt has been an amazing 18 months in global petrochemicals and plastics during which the tsunami of new supply from Asia and the Middle East has been constantly delayed. This, along with deep operating cuts by Western producers, has created tight markets.

The industry has further benefited from Chinese demand growth that has been far beyond any estimates. Overall polyethylene growth in China was more than 30% last year, according to Shanghai-based commodity information service CBI China.

But around 29m tonnes/year of ethylene capacity is due onstream in the 2008-2012 period, estimates the ICIS pricing Worldwide Ethylene Plant Report. With global ethylene growth at around 4-5%/year, the outlook for the market is grim.

Many exceptional factors drove Chinese growth to record-high levels in 2009 (see story on page 18). Going forward, increases in demand are expected to fall more in line with the expansion of overall GDP over the next few years. This is expected to occur as China raises its self-sufficiency in many basic petrochemicals and plastics.

It’s been a fantastic 18 months for everyone – even some of the higher-cost producers. But eventually, this big volume of new capacity has to hit the market, leading to some more painful decisions for those too-far to the right of the cost curve.

 

Check out John Richardson’s ICIS Asian Chemical Connections Blog

Photo credit: Syntagma Media

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