In a report, Moody's Investors Service sees a stable outlook for the Asian petrochemical industry (ex-Japan) over the next 12-18 months. However, within the sector, some products show more favourable prospects than others largely due to varying demand-supply dynamics. Business risks also differ, depending on each company's product portfolio, the markets served, feedstock positions and product cycles. Despite this, solid economic trends and demand will balance the additional capacity coming on stream over 2006-2007.
Persistently high crude oil prices are pushing up naphtha prices (the major feedstock for ethylene in Asia), and will possibly slow demand for downstream petrochemicals products. If oil prices remain high through 2006-07 such that demand slows down significantly, it would adversely impact the petrochemical market conditions given the on-going capacity additions. In such case, it is imperative that producers are able to pass additional feedstock costs onto the customers, particularly for segments with less favourable supply/demand prospects, and for the smaller un-integrated downstream players with weak bargaining power.
09-May-06 
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