HOUSTON (April 14, 10 a.m. EDT) — Polyethylene looks to remain the big kid on the global resin block, but its short-term growth rates in North America may vary as consumption increases in other regions of the world.
Global growth should be just under 5 percent per year between 1990 and 2010, according to Bob Beil, vice president of PE for Dow Chemical Co. of Midland, Mich. That rate calls for the addition of 10 world-scale PE trains each year.
2003 should check in with a slightly lower PE growth rate of 4.5 percent in North America, said Pat Duke, a consultant with Houston's DeWitt & Co. That outlook calls for a “worst case scenario” in which demand growth fizzles out in the second half of the year as PE processors cut back on restocking-based purchases, showing that underlying growth in the market isn't there, Duke said at his firm's World Petrochemical Review, held March 26-27 in Houston.
Chemical Market Associates Inc. of Houston is a little more optimistic on U.S./Canadian linear low density PE, predicting growth of almost 7 percent this year. CMAI foresees 2003 growth of almost 4 percent in U.S./Canadian high density PE, while the region's LDPE market should see demand dip by about 1 percent.
DeWitt's Duke anticipates overall North American PE operating rates to be in the mid-80s in 2003. CMAI puts U.S./Canadian 2003 operating rates at 92 percent for LDPE, 83 percent for LLDPE and 84 percent for HDPE.
The next run-up in PE demand should come in 2004 or 2005, according to Kevin Boyle, vice president of PE for Atofina Petrochemicals Inc. in Houston. The market could be considerably tight by that point with no major new capacity on the books outside of a 700 million pound reactor — shared by Chevron Phillips Chemical Co. LP and BP Solvay — being launched in Baytown, Texas, later this year. BP Solvay also closed 260 million pounds of HDPE capacity in Deer Park, Texas, late last year.
When they arrive, future PE plants might need to move beyond the current “world-scale” definition of 700 million to 1 billion pounds of capacity, Boyle said. Such a move might require improvements in extrusion technology, he added.
Dow's Beil anticipates further growth for PE in disposable markets, such as food packaging, diapers and stretch film, as well as other areas where PE is making headway against paper, metal or glass.
At CMAI, consultant Howard Rappaport expects Asia to surpass North America as the world's largest PE consuming region by 2005. Major PE bag exports from China and elsewhere also are taking potential resin business away from North American, Western European and Japanese businesses.
Last year, bags imported into North America accounted for about 1.4 billion pounds of resin, Rappaport said at his firm's World Petrochemical Conference, March 26-27 in Houston. A significant example comes from U.S. mega-retailer Target Corp., which now acquires more than half of its plastic bags from overseas, according to Rappaport.
Rappaport added that he anticipates permanent changes in the buying patterns of North American PE users.
“There's a big trend down in resin inventories at the converter level in the U.S. and Europe,” he said. “I don't think it's going to come back to pre-Y2K levels.”
“Polyethylene producers should be careful when they look at sales, because some growth will probably be through inventory restocking. Just because sales look good for a month or two doesn't mean the market is growing.”