Petrochemicals market may have light at the end of the pipeline
By David Hannon -- Purchasing, 4/30/2009 2:00:00 AM
While the petrochemicals market has seen its share of struggles in the past year, there are some indications that demand is increasing. And there is some optimistic talk from market executives of late.
In a recent interview with CNBC television, the CEO of Saudi Arabia's plastics giant SABIC Mohamed Al-Mady said "the light at the end of the tunnel is visible right now because of depleted inventories and because of the things our industry has done to reduce capacity worldwide. I am very hopeful that by the end of the year we will see better growth."
Not all market watchers are so optimistic. Sergey Vasnetsov, the managing director of chemicals at the Barclays Capital in New York, said recently, "We continue to expect 2009–2011 to be the trough for the majority of commodity chemicals, assuming there is a return to normal economic growth in 2010 and beyond."
Within the petrochemical sector, plastics demand appears to have bottomed out and is be heading back, according to some indicators. Purchasingdata.com's plastics resins buying plans index has ticked up slightly the past fours months after hitting a bottom in December.
Overall, the petrochemical capacity cutbacks that Al-Mady was referring to continue at breakneck pace. LyondellBasell said it plans to strengthen its emergence from bankruptcy by reducing its workforce by 17% and closing as many as 10 manufacturing plants. LyondellBasell's U.S. operations declared bankruptcy in January. "This cost reduction plan is a key part of our effort to offset the current sales volume and margin weakness," in the market said Alan Bigman, LyondellBasell's CFO in a company statement.
When asked about the future of plastics in manufacturing, Al-Mady said "plastics will always be needed" and that demand for plastics will remain in the largest manufacturing industries, including automotive and aerospace which will leverage new plastics technology to be more fuel-efficient. "We are going to invest in plastics technology for the future."
As evidence to that fact, LyondellBasell said its Hifax TRC 280X compounded polypropylene resin is being used by Ford in Europe to produce the tailgate outer panel and the roof spoiler for the new Ford Kuga. It is the first time Ford in Europe has used an advanced polyolefin in a body panel application.
One capacity upgrade of note is the Sinopec/SABIC plan to open new capacity at an oil refinery in Tianjin, China that includes the addition of an ethylene plant capable of producing 1.2 million tons a year starting in November.
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