PP consumption to recover slowly, says report

HOUSTON (Aug. 26, 2:55 p.m. ET) -- US research and consulting group Townsend Solutions expects global consumption of polypropylene to grow by less than 1 percent in 2009, following on from a large decline in 2008 precipitated by the worldwide economic downturn.

Global consumption of PP was 45.5 million metric tonnes in 2008, down by 1.4 million tonnes from 2007. Townsend said it expects the PP market to reach 2007 usage levels again during 2010.

Over the next five years, Houston-based Townsend Solutions forecasts global PP consumption to increase by an average 3.7 percent per year.

The Townsend Polypropylene Report provides details of where PP capacity additions (and reductions) are currently planned, distributed by the following regions:

* China 34 percent of total new capacity or 5.80 million tonnes

* Middle East/Africa 29 percent or 4.98 million tonnes

* India 19 percent or 3.29 million tonnes

* Central/Eastern Europe 10 percent or 1.69 million tonnes

* Central/South America 7 percent or 1.17 million tonnes

* Asia/Pacific 2 percent or 450,000 tonnes

* Western Europe 1 percent or 160,000 tonnes

* Japan, a reduction of -0.5 percent or -78,000 tonnes

* North America, a reduction of -1.5 percent  or -263,000 tonnes

Average PP capacity for the world is forecast by Townsend to increase from 52.0 million tonnes in 2008 to 69.1 million tonnes in 2013.

Townsend said additional production planned by various companies will result in a period of historically low capacity utilization levels of below 80 percent by 2012.

The company said: “We expect that global PP capacity utilization will drop to 82 percent in 2009 and below 80 percent from 2012 onward. Capacity utilizations below 85 percent have historically resulted in operating losses for high cost producers, which is why Townsend expects plant closures and future projects being delayed or cancelled.”

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