|Despite a major recovery in 2010, turbulent times lie ahead for the global polyolefins industry as it continues to grapple with the residual effects of the economic crisis of 2008-09. Concerns remain over the fragile state of the economic recovery in the United States and Western Europe, and the withdrawal of government backed subsidies; the housing and automobile industries (a major end-use market for polyolefins) continue to struggle in many countries; and the current political instability in North Africa and the Middle East is now placing further pressure on polyolefin market as crude oil prices soar. These are the findings of a study by Nexant in its 2010 Global Executive Report. The report highlights how today�s polyolefins market is a tale of two worlds - the developed and developing - as the United States and Western Europe struggle to maintain a modest recovery amidst the booming developing economies in Asia, particularly China and India.
In 2010, global polyolefin consumption leapt substantially by 6.8% following a decline of 0.14% in the previous year. But even though Western Europe consumption grew positively at 4.7%, it was still below the global average, whereas Asian polyolefin demand surged by 6.9%.
SUPPLY: The emphasis to invest in locations of advantaged feedstocks or to build in regions of high market growth has led Asia Pacific to increase its share of world polyolefin capacity from 33% ten years ago to 39% last year, and the Middle East from 6 to 14%. However, the United States and Western Europe markets combined have fallen substantially from 51 to 36% over the same period.
TRADE: In terms of trade, the Middle East continues to cement its position as the major global supplier. The region is set to become the major exporting region of polyethylene with exports of over 12 mln tpa forecast by 2015, rising to 18 mln tons in 2025: under the same scenario, Asia is set to import over 13 mln tpa in 2025. Although North America is currently a strong exporter, its position will switch to net import by 2018 as consumption outstrips capacity addition. Western Europe will also remain a large polyolefin importer.
The report also finds that:
� Global operating rates will be depressed in 2011 as demand growth is unlikely to off-set new capacity additions due on-stream in the Middle East and Asia.
� Crude oil prices will be under the spotlight as current political unrest in North Africa and the Middle East push oil prices once again over US$100 per barrel, putting pressure on polyolefin pricing and purchasing arrangements.
� HDPE demand for bimodal grades in film and pipe will continue to rise strongly � HDPE has shown the highest growth of all polyolefins, up 8.7% on 2009.
� Polypropylene, the largest polyolefin market has shown weaker performance compared to HDPE (5.6% growth in 2010) due to its close links with the automotive industry whose recovery has been sluggish.
� LLDPE continues to penetrate the LDPE market, displacing LDPE with easy processing LLDPE, while use of single site/metallocene LLDPE continues to rise across the world.