Plastics News staff reporter Frank Esposito wrote the following items from CMAI World Petrochemical Conference and DeWitt World Petrochemical Review, both held March 24-25 in Houston.
Stock pro is urging more cuts in industry
Chemicals and plastics companies should not be content with improvements made in 2003, since a prominent Wall Street analyst said they still have got a way to go.
Sergey Vasnetsov, a senior vice president with Lehman Bros. in New York, said that more plant shutdowns are needed.
``Shutdowns are difficult and painful, but they're the only self-help tool available to ethylene and other U.S. commodities,'' Vasnetsov said at the CMAI World Petrochemical Conference. ``There were a large number of temporary maintenance shutdowns between 2001 and 2003, but that's a bandage solution that can't last for another three years.''
``Waiting for the economy to bail us out isn't an option,'' he added. ``Oversupply needs to be resolved before the cyclical peak is behind us.''
Vasnetsov also cautioned that if the industry's typical peak isn't as high as it's been in the past, the chemical industry could face the same situation the paper industry faced in the late 1980s. The chemical peak year now accounts for 25-30 percent of total growth from its eight-year cycle. After the paper industry peak lessened, paper stock prices went on to underperform the S&P 500 by 25 percent, according to Vasnetsov, who tracks Dow Chemical Co., DuPont Co. and other major public firms.
Vasnetsov also pointed out that average earnings per share for chemical stocks has dropped 20 percent since 1997, even though industry production volume is up 10 percent.
Global PET rates likely to peak in '05
Global PET operating rates are expected to peak at 82 percent in 2005 before slipping down to 75 percent by 2010.
DeWitt market analyst Edgar Acosta estimated the current global rate at 77 percent. A good deal of future expansion will be in China, where almost 9 billion pounds of new capacity will have hit the market between 2000 and 2005.
As a result of this new capacity, Acosta said that China likely will close all PET operations with less than 220 million pounds of annual capacity.
SBCs predicted to aid isoprene demand
Growth in the styrenic block copolymer market is expected to boost North American demand for isoprene monomer in the next year.
Increased SBC sales into pressure-sensitive tapes and labels should lift isoprene demand in that segment by 6 percent to almost 250 million pounds annually, according to DeWitt market analyst John DiStefano. SBCs will account for almost half of the North American isoprene market at that point, DiStefano said.
PC optical media expected to trail off
The global polycarbonate market is expected to balance out in 2004 and 2005, but growth in optical media applications such as compact discs and DVDs will cool down.
CMAI market analyst Ben Smith said PC overcapacity resulted when investments were made for optical media based on growth rates that are no longer present. Optical media now is subject to cannibalization by MP3s, high bandwidth and USB drives, said Smith, who expects global optical media demand to increase 10 percent annually between 2001 and 2005.
By comparison, the market had averaged 35 percent annual growth between 1996 and 2000. A string of expansions and reduced demand drove U.S. per-pound selling prices for PC down by at least 25 percent since early 2001.