|After the financially disastrous year of 2008, and a limping 2009, the year 2010 can simply be described as a year of recovery. It is quite possible that the World will see positive growth in GDP of over 2% in 2010. Good results in the last quarter of 2010 could bring the overall GDP growth closer to 3% in USA, the largest global economy with GDP of about US$14.3 trillion, comprising almost 23% share in the World economy. European Union, with a GDP of US$12.5 trillion and having 20% share in the global economy, is still experiencing financial hiccups. In November, Ireland became the second eurozone country, after Greece, to require emergency support from its partners in the European Union as well as the International Monetary Fund to avoid effective bankruptcy. Portugal and Spain continue to wrestle with their hefty debt burdens, and concerns abound that other EU members will get drawn into the financial swamp. These economies have barely recovered from the recession, and the EU is likely to grow just below 1% over 2009 levels. Japan, the third largest economy with GDP of over US$5.1 trillion with an 8% share in the global economy, is likely to achieve a positive growth of about 2.5% after two bad years. The emerging economies of BRIC (Brazil, Russia, India and China) with almost 15% share of the global economy had the fastest exit from the financial tsunami of 2008 as well as a faster economic recovery in 2009, and continued to drive the World economy in 2010. China among the BRIC countries is expected to have another year of sterling performance with almost 10% growth in GDP during 2010. India is also likely to achieve robust growth, with 8.8% economic growth in 2010. In both these Asian countries, growth is essentially fueled by large domestic demand. Asia is expected to achieve GDP growth of over 8% in 2010 making it the driving force of global economic growth in 2010. It seems that the economic woes of 2008 and 2009 are certainly behind us. The present indicators suggest that 2011 could be a growth year with GDP growth rate of 3.3%, with the only dampening factor being higher inflation in China and India. Another dark cloud on the horizon seems to be the rising oil prices past US$90 per barrel during the closing weeks of 2010. If oil prices continue to remain north bound longer, it could result in weaker purchasing power of the people.
Oil, which rallied 78% in 2009, has advanced by about 20% in 2010 on signs of a global economic recovery. Oil prices started the year around US$78 and hovered at those levels for most part of the year, spiking past US$80 from March to mid May, and ending the year at levels above US$90. The highs in oil prices this year have been driven by signs of economic revival and rising employment levels in USA, a faster pace of growth and an improvement in the labor market that boosted household spending amid rising stocks and strengthening dollar. Oil prices rose as high as US$93/barrel towards the end of 2010, due to acute winters in the Northern Hemisphere. Price variation of about 20% observed in 2010 is not as wide as seen in 2009, indicating a level of stability in oil price towards higher side has been reached after last two years of wild fluctuations. The average price of oil moved upwards from US$63/barrel in 2009 to US$79/barrel in 2010. The important polymer feedstocks of ethylene and propylene also saw about 20% price variations in 2010. Polymer price fluctuations moved in tandem with oil/ethylene/propylene and remained around 20% over the year. The price variation in 2010 was definitely lower compared to 2008 and 2009 indicating some stability in the polymer prices in 2010.
The Middle Eastern countries, despite abundant reserves of oil and natural gas, seem to be on the verge of running short of natural gas. Despite over 40% of the world's remaining gas reserves, the region is experiencing shortage of natural gas, and is considering naphtha based petrochemical projects. Demand for gas is unlikely to slow, as these countries are committed to huge investments in infrastructure and power sector- The oil price boom in 2008 led to handsome profits for oil producing nations, triggering off economic activity, and , lower gas prices increased demand for power generation. The ethane shortage has taken place in parallel with the shale-gas boom. The Marcellus formation in western Pennsylvania and northern West Virginia is unusually rich in natural-gas liquids including ethane and is the largest known US gas field. The region has no crackers. New drilling techniques are boosting production from shale formations, keeping US prices of natural-gas low relative to oil. This has prompted US chemical makers Dow Chemical Co., Eastman Chemical Co. and Chevron Phillips Chemical Co. to use more gas as feedstock. Chevron Phillips received preliminary approval from Texas regulators to reopen a cracker shut in 2008 at its Sweeny complex. Eastman is opening a mothballed cracker in Longview, Texas, because it says low-cost gas has made the US more competitive. Dow plans to use 30% more ethane, a component of natural gas, at its Gulf crackers. Proposals for getting Marcellus gas to the chemical industry now involves piping it to crackers on the US Gulf Coast, where the country�s chemical industry in concentrated.
Trade Flow Patterns
North America and Europe that have been exporters of petrochemicals and polymers are increasingly becoming net importers due to lack of new capacities and closure of old uneconomic size plants. The economic downturn has accelerated Europe's rationalization efforts-around 7 mln tpa of capacity closure has been recorded since 2008 in Europe's petrochemicals base. Much of this capacity has been in commodity polymers, such as polyethylene (PE), polypropylene (PP), polystyrene (PS) and polyethylene terephthalate (PET). Plant closures have been accompanied in several instances by bringing replacement capacity on stream to tap into higher-growth market segments with higher-value-added products. This is regarded essential if Europe is to retain its competitiveness against material potentially arriving from the new wave of plant start-ups in the Middle East. In the last decade, North America was the primary exporter and supplier of products such as PE and PP to the world. Europe was well balanced between supply and demand. However, trade flow patterns have changed dramatically, and the Middle East is now the dominant inter-regional exporter of polyolefins. Many European customers have already turned to the Middle East for supplies of raw materials such as PE, and Europe is expected to become a net importer of polyolefins by 2010.