Strong long-term polyethylene demand expected
Nova Chemical exec sees news supply outpaced by purchasing
By Peter Taffe of ICIS.com and Tom Stundza, Purchasing.com -- Purchasing, 9/18/2008 1:39:00 PM
“Steady, strong growth in purchasing of polyethylene (PE) by global markets will make quick work of the large increase in new capacity in the Middle East and China,” predicts John Hotz, vice president of polyethylene at Nova Chemicals in Pittsburgh. And that will keep upward pressure on prices, he adds.
His optimistic view is based on a sharp recovery of global demand to growth “just over 5% annually,” or 45 billion lbs in total, between 2008 and 2012, which will absorb the 42 billion lbs of new capacity that will be on line by then, he tells the Chemical Purchasing Summit organised by ICIS Chemical Business and Purchasing magazines. While PE capacity is shrinking in North America and Europe, it is growing briskly across Asia and the Middle East--and staying flat in the rest of the world.
Hotz admits that Nova’s optimism is based on expected steady growth in global use of the benchmark resin demand despite a slowdown growth of the world’s economies through 2012. One of the key reasons is that PE is used in packaging applications rather than capital goods. Also, from a historical perspective, PE use has grown steadily at that 5%/year growth rate over the last 16 years despite global economic ups and downs.
In 2007, PE demand from producers was 32 billion lbs in North America, Hotz says, with 28% used in packaging films, 26% for molded parts, 6% for pipe and tube and 4% for retail bags--with the remaining 36% split evenly between resellers and the “other uses” category.
Hotz tells the audience that he expects PE growth in the developing nations to continue rather briskly. He showed data that the per-capita consumption of PE in developing nations is only 14 lbs per capita compared to 80 lbs per capita in western advanced economies. In the U.S., for example, per-capita PE use is 100 lb while its about 21 lbs in China.
Yet, developing countries have huge populations and eventually will have higher per-capita consumption, he suggests, and that will boost the global industry’s operating rate from 90% now to 95% early next decade--even after the new capacity is added.
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