Nova Chemicals Inc. remains enthusiastic about the polyethylene market in early 2004, largely because the second half of 2003 was ``the strongest six-month period the industry had seen in a long time,'' according to a company executive who spoke at Thermoplastic Concentrates 2004, Feb. 11-13 in New Orleans.
``December was very strong,'' Nova PE marketing director Mark Kay said. ``And although the growth rate between 2000 and 2003 was basically zero, we view this situation as very temporary.''
Kay also said Nova, which ranks as North America's fifth-largest PE maker, expects operating rates in the North American PE resin industry to reach 90 percent in the third quarter of the year, as demand improves and inventories are refilled.
``Inventory has been squeezed throughout the chain,'' he said. ``We're now dealing with record-low chain inventory from ethylene to resin to the end producer.''
But Kay was quick to add that high natural-gas feedstock costs remain a considerable burden for PE makers, especially as they work to pass those costs on to resin buyers. Natural gas prices averaged about $2 per million British thermal units between 1990 and 1999, but between 2000 and 2003, that average skyrocketed to $4.30.
``The second [natural gas] spike [in early 2003] came in the third year of a downturn,'' Kay explained. ``It forced producers to re-examine how they could recoup some costs quickly.''
In the short-term, PE makers passed an immediate 6 cent-per-pound ``energy surcharge'' in 2003. That charge was later rescinded, but Kay said resin makers now are using such methods as pre-buying allotments and ``favored nation'' clauses with some customers to keep their costs in line.
Kay described the increased role of China and other Asian nations in the global market as ``a great opportunity and a thorn in our side at the same time.'' U.S. imports of PE film and bags - half of which come from Asia - now equal 6 percent of U.S. PE consumption. Although that number roughly has doubled in the last five years, Kay pointed out it's almost equal to levels reached in the early 1990s. The Asian slice of the import pie has increased the most.
And although 3.5 billion pounds of North American PE capacity has been taken out since 2000, Kay said there is still room for consolidation in the market. Technology also will continue to play a major role in the PE world, where Nova recently commercialized its Surpass-brand line of enhanced linear low density PE based on single-site catalysts.
A recent third-party survey of North American PE processors ranked Nova first overall based on product offering, processing, consistency and innovation, according to Kay. The study was commissioned by Nova and other PE makers, Kay said.
Nova's olefins/polyolefins business posted an operating profit of $14 million in 2003 after losing $5 million in 2002. The unit's sales also increased almost 33 percent to about $2.6 billion last year. Nova's overall PE sales volume also increased almost 6 percent in 2003, coming in at just over 3 billion pounds.