PHOENIX (Feb. 12, 4:15 p.m. EST) — After listening to Bob Buesinger, anyone participating in the polyethylene market might want to put new shock absorbers on their cars.
Buesinger, Americas PE sales manager for Chevron Phillips Chemical Co. of Houston, sees the road ahead for PE as improving over 2002, but still being a bumpy trail instead of a smooth superhighway.
“It looks like the trend could be toward more volatility,” Buesinger said at the 2003 Plastics News Executive Forum, held Jan. 26-29 in Phoenix. “We could be seeing up and down [movement] every year. It's really hard to predict.”
After PE prices plummeted in 2001, they raced up an average of 11 cents per pound in 2002 and already are up another 5 cents in 2003, as producers became determined to improve their margins and offset feedstock cost pressure. If natural gas stays at or above $5 per million Btu — and if crude oil stays at or above $30 per barrel — Buesinger said chances are good an additional 6 cents per pound announced for February could go through.
Chevron Phillips, North America's largest maker of high density PE, expects industry operating rates to increase from the high 80s to the low 90s in the 2003-05 period. This is partly due to a lack of new PE capacity and the shutdown of more than a billion pounds of older capacity in 2002, Buesinger said.
In 2002, the company saw PE use in consumer goods and food packaging continue to grow, but markets for large shipping containers and pipe were slow to recover. The resin executive traced the pipe slowdown to reduced infrastructure spending by cities and other government agencies.
Fuel tanks and plastic lumber and decking topped Buesinger's list of emerging growth markets for PE. Those markets will play a role in the 4-6 percent annual PE growth rate Chevron Phillips foresees in North America for 2003-05.
An annual growth rate of 4 percent would create a need for at least one new world-scale PE plant each year, but no such projects are on the table.
“The financial performance of polyethylene makers has been so poor that it's been more difficult to do projects,” Buesinger said. “And it's grown tougher and tougher as we get squeezed on margins.”
The pull of foreign PE markets also will continue to grow. North American PE exports are expected to shrink through 2005, while imports from the Asia Pacific region are expected to double in the next five years.
Big chunks of new capacity in the Middle East — including Chevron Phillips' billion-pound joint venture PE plant in Qatar — could be routed to China, which is expected to invest in massive infrastucture projects for the 2008 Summer Olympics.
Imports of fabricated PE products, mostly from China, also are on the rise. Almost 1 billion pounds of Chinese PE bags, film and housewares made their way into the United States in 2002, Buesinger said.
And although he said there is a possibility that resin made in the Middle East could make its way to North America, there is no shipping and packing infrastructure in place right now. He added that North American PE “can be competitive in the world market” if natural gas prices remain between $2 and $4 per million Btu.
As for the safety of Chevron Phillips' Qatar-based venture in the event of a U.S. war with Iraq, Buesinger said his firm is taking comfort in the presence of U.S. military personnel in that country.
“We feel safe right now,” he said. “We're not panicking.”