Outlook brightening for petrochemical companies in Texas

14-Dec-09
Texas is home to several key petrochemical players - Dow, Dupont, LyondellBasell, Formosa Plastics Point Comfort and Invista (manufacturer of nylon intermediates). Though still feeble, the petrochemical industry here has witnessed a marginal upbeat trend as market sentiments improve and operating rates near normal levels. Weakness persists in the construction and automotive sectors, but the wire and cable business is particularly strong. Most of Dow's recovery can be attributed to its move from basics to performance chemicals, as well as acquisition of Rohm and Haas. During the downturn, Dow reduced its workforce at the Seadrift site by 10% and shut down its Nordel rubber plant, one of 12 units on site. It also reduced operating rates to cope with reduced market demand. Despite lower than average demand anticipated in 2010, LyondellBasell views strong competition in North America along with other PE makers, as a reason to be optimistic. Profitability could take a beating over the next few years as more polyolefin production capacity comes on stream in the Middle East. Better supply-demand balance is expected only after 2010 end/2011. During the downturn, though Formosa's Point Comfort site avoided layoffs, it changed its system of contract workers after completion of some construction contracts. Since its units were operating at reduced capacity, Formosa employees handled additional maintenance. Dupont saw minimal effect of the economic downturn as it controlled costs, reduced contract workers and run its plants at reduced output since the beginning of the year. Demand revival started as early as Q1-09.
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