Gloomy outlook for polyolefins with markets estimated to lengthen by mid 2010

A global C2, C3 supply glut is estimated with an increasing number of petrochem facilities coming onstream in the Middle East and Asia, particularly China. This supply glut is expected to severely lengthen markets towards the end of Q2-2010. A recent UBS report estimates that 8.6 mln tpa of ethylene capacity is due on-stream globally this year with demand growth likely to be only 2.6 mln tpa. This is set to be the biggest annual increase in C2 capacity in a decade. 46% of this year's ethylene start-ups are in China versus only 17% in the Middle East. Last year around 80% of start-ups were in the Middle East. General labour shortages, including senior engineers and construction workers, don't appear to be as acute in China as elsewhere. Infrastructure outside the battery limits of plants, another factor which is rumoured to have slowed capacity additions in the Middle East, are less likely to be a problem in China. But 15% of Asian current Asian ethylene capacity will be closed down this year for turnarounds compared with 10% in 2009, again according to the UBS report. And operating-rate discipline among Western producers remains high, with more rationalisation of capacity, especially in Europe, possible.
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