Chemical Market Associates, Inc. (CMAI) announces the completion of the 2011 World Polyolefins Analysis,an annual global study that covers historical trends and future projections for supply,demand, production, capacity, trade, pricing and profitability of the global Polyethylene(PE) and Polypropylene (PP) industry for the period 2005 to 2015.
Current Market Situation
Polyolefin demand growth resumed during the second half of 2009 with the onset of the economic recovery phase. Emerging market economies and China, in particular, provided the main support for the renewed expansion in the global polyolefins market as reflected in the dramatic increase of Chinese polyethylene and polypropylene imports that is now abating.
On the supply side, capacity rationalizations and delays in the start-up of several major new petrochemical complexes in the Middle East further moderated the deterioration in the global supply/demand balance. In fact, operating rates remained in the low 80 percent range despite still massive capacity additions. Profitability in 2009, on average, even registered a small increase over the corresponding 2008 levels, which also benefitted from producer discipline in managing the supply side. The situation in 2010 continues to improve, although the pace varies greatly among regions.
Growth in polyolefin consumption will continue to be driven mainly by the rapid economic development of numerous transition countries in the Asia Pacific region, Central Europe,the Middle East and South America. Investments in export-oriented plastics converting capacities in many of these countries will also help fuel polyolefin resin demand growth.
Benefits deriving from the resumption in demand growth, however, will be largely offset by the current wave of capacity additions. Although concentrated in Asia and the Middle East,the start up of several world-scale polyethylene and polypropylene complexes between 2009 and 2011 will likely keep global operating rates at a low level in the near term. Toward the middle of the decade, plant utilization will gradually increase, as the market absorbs the surplus capacity.
The persistence of adverse market conditions generally is preventing any meaningful increases in profitability in the near term. In fact, polyolefin cash margins on average are forecast to remain at, or even below, the current depressed level over the next two to three years. However, profitability among individual polyethylene producers will continue to vary greatly based on feedstock type and geographic location.