|Polyethylene (PE), the largest group of commodity polymers generally grows in line with GDP growth. 2008 was an exception where PE declined by almost 4%. Consumption in 2008 was 67 mln tons compared to 71 mln tons in 2007. The global economic slowdown led to decline in consumption in China, other Asia Pacific countries, North America, Western Europe and Japan. Positive forces are in place in developing regions for PE growth between 2008 and 2013. The developing regions of China, Central/Eastern Europe, Central/South America, India, Middle East/Africa and Other Asia-Pacific are exhibiting broad-based growth fundamentals. The combined growth rate of the developing-regions is projected to be 4.6% pa over the five-year time period. Growth in developing regions is well above the average global projected annual growth rate of 3.2% pa. The more developed regions of North America, Western Europe, and Japan will have a 5 year growth rate of only 1.6% pa on an average over the 2008-2013 time frame.
Polyethylene accounts for about 50% of the total polymer demand. Historically, North America and Europe have been the major producers and consumers of polyethylene and account for 40% of the global demand. However, two broad trends have emerged over the last decade in the global polyethylene industry; the emergence of China as the principal engine of growth for the global demand and a resurgent Middle East eager to leverage the low priced feedstock advantage in the global markets. The epicenter of the polyethylene industry has shifted from West of Suez to East of Suez. According to GBI Research :
� Asia has emerged as the largest market for polyethylene and the key driver of global demand
� China will continue to be the principal demand driver for polyethylene demand in Asia
� Middle East region will witness the maximum capacity additions for manufacturing polyethylene
� There will be low demand growth for polyethylene in large markets like North America and Europe
� Packaging applications will account for the bulk of polyethylene demand in all the regions of the world
� Construction sector accounts for second largest chunk of polyethylene demand and Asian countries will drive the demand for this sector
� Middle East and Asian companies will dominate the global polyethylene market in the future
Global polyethylene capacity in 2008 totaled 93.87 mln tons and Asia Pacific, North America and Europe are the major regions that accounted for over 76% of global polyethylene plant capacity in 2008 according to Global Markets Direct. This capacity is expected to increase from 93.87 mln tons in 2008 to 127.89 mln tons in 2015, at a CAGR of 4.5%. HDPE grade accounted for 46% of the global polyethylene capacity in 2008 and will see more than 44% of the polyethylene capacity additions until 2015. Major companies operating in the global polyethylene sector include Dow Chemical Company, Exxon Mobil Corp., LyondellBasell Industries, SABIC and China Petroleum & Chemical Corporation. These companies accounted for 33.2% of the global polyethylene plant capacity in 2008. China is the most attractive market for polyethylene in the world and will be the principal driver for global polyethylene demand to 2020 as per Global Markets Direct. The Chinese polyethylene market size was US$13865 mln in 2008 and is forecast to grow by more than 8%, accounting for nearly 17% of the global polyethylene demand in 2020. China has emerged as the principal manufacturing and export location for low value plastic products in the world due to low cost manpower and significant government support. The rapid increase in downstream processing capacity additions, primarily geared towards export markets, will be the main driver of polyethylene demand in the future. With over 40% of the demand dependent on imports, China will continue to remain the largest importer of polyethylene in the world despite the many polyethylene capacity additions expected to come on-stream in the next few years. The Middle East region will see more than 7 mln tons of polyethylene capacity additions in the next few years. Accounting for more than 50% of the global planned polyethylene capacity additions, the Middle East region will emerge as the largest exporter of polyethylene in the world. Production of polyethylene in most countries will be unable to compete with the Middle East production as feedstock costs of the Middle East producers are 1/5th of the cost of feedstock available to Asian and European producers. Over 40% of the global polyethylene demand comes from developed markets of North America and Europe and the demand from these two regions is expected to remain stagnant going to 2020. North America accounted for 21% of the global polyethylene demand of US$105,784 mln in 2008, and according to estimates, it will account for 15% of the global polyethylene demand in 2020. The demand growth in the US will be stagnant as the economic outlook for the next few years is bleak. The absence of capacity additions in the downstream processing sectors is the single most important reason for demand stagnation in the US. Europe accounted for 20% of the global polyethylene demand of US$105,784 mln in 2008, and is estimated to account for 15% of the global polyethylene demand in 2020. Demand from Spain and Italy were the main drivers for European demand growth in the past decade. However, the absence of significant growth from large economies like Germany and France will reduce the average growth for the region. The growth from Spain and Italy will not offset the decline in demand from the traditionally large consuming countries of France and Germany.
Asia Pacific region accounted for over 43% of the global polyethylene capacity in 2008, and is expected to account for nearly 50% of the planned capacity additions until 2015. Asia Pacific region will have the maximum capacity additions of over 12 mln tons during the period 2008-2015. In this region, China and India will account for more than 8 mln tons of future capacity additions. Most of the Chinese capacities have come in the last decade and are dominated by state owned Chinese energy companies. Unipol is the dominant technology used to manufacture polyethylene, followed by Innovene technology. Naphtha is the dominant key feedstock for manufacturing polyethylene and gas phase process is the dominant process used to manufacture polyethylene, globally.