Increase in global polyolefin consumption will continue to be driven by novel applications

Polyolefins represent almost two-thirds of the major commodity thermoplastics used worldwide, and have numerous applications ranging from automotive parts to carpet fibers, household and food containers, toys, stretch film/shrink film, diapers and trash bags. The global polyolefin market is changing dramatically in response to the quickly advancing industrialization process in emerging markets, as well as improvements in global communications and trade liberalization. According to the CMAI analysis, increases in consumption will continue to be driven by novel applications where plastics can deliver cost advantages, performance enhancements, or both. Investments in polyolefin production capacity are increasingly concentrated in regions with affordable supplies of feedstocks or high-demand growth areas, such as the Middle East and the Asia Pacific region. The same trend, particularly in Western Europe, is driving industry consolidation, operations optimization, and a shift toward the production of higher-value, higher-performance products. In North America, low-cost feedstock from shale gas is revitalizing the polyethylene (PE) business, making PE exports highly competitive globally. In response, several producers have announced new capital projects that are currently scheduled to come on-stream in the second half of the decade. One of the most challenging issues facing the polyolefin industry during the last decade has been the loss of its pricing power. Wedged between the demands of upstream oil and gas corporations and major retail chains like Walmart on the downstream side, the polyolefin production chain has been caught in the middle. While energy and raw material prices increased in response to tighter global market conditions, prices for finished goods remained at the same level or even declined, as imports from low labor cost countries flooded the market. As a result, profits in the polyolefin industry had all but disappeared. Although the recession of 2008-2009 only exacerbated the already unfavorable market conditions for polyolefins, producers of the product are making strategic moves to protect against further margin erosion. Instead of engaging in competition for market shares, producers have been controlling production and inventories to keep the market balance tight. The development of "green" sources for the production of plastics is advancing steadily and is generating the first tangible results. In September 2010, Braskem started operations at a Brazilian facility that produces conventional polyethylene from sugar cane. Brakem's customers include major consumer-product corporations that will be using the sugar-cane-based polyethylene resins for packaging of cosmetics and container closures. A second project for the production of bio-polymer, also in Brazil, was recently announced jointly by Dow and Mitsui & Co.