North American markets for polyethylene and polypropylene will continue to grow, but the size and shape of the growth will be quite a bit different in the years ahead.
Vaughn Deasy, vice president of polymer sales for Equistar Chemicals LP in Houston, and Dave Durand, global PP consulting director for Houston-based Townsend Polymer Services & Information, tackled those markets at the Plastics News Executive Forum, held March 6-8 in Tampa.
Deasy, whose firm ranks as one of North America's largest high density PE makers, said global PE operating rates are expected to remain high through 2010, in spite of large amounts of capacity being added in the Middle East. In that region, 23.5 billion pounds of PE capacity will be added between 2005 and 2010, with more than 40 percent of that amount in Saudi Arabia.
China also will remain a large global buyer of PE, although that country's unpredictable buying habits will keep many market players guessing.
``China's always in the [PE] market,'' said Deasy, who's been with Equistar and parent firm Lyondell Chemical Co. since 1995. ``But they have very different buying patterns than what we're used to. They'll buy when there's an opportunity and then build inventory and store it.''
And even with price volatility high in North America - where prices shot up after Hurricanes Katrina and Rita but now have declined for three straight months - the region isn't going away as a supplier anytime soon.
``We're very confident that North American PE and ethylene derivatives are going to be able to compete globally for a very long time,'' Deasy predicted. ``The North American market may not build any new plants, but there's a high cost to exit this business, and these plants are still competitive. They're older, but they've been overhauled many times over and are still productive.''
But North America's role in the 2006 PE market is a new one.
``Every other [PE] cycle turned on North American expansion,'' Deasy said. ``It used to be simple - we'd just go build another plant in Texas. But it's not that way anymore. Now we have to look at Mideast capacity, Asian demand, feedstock and energy prices, and continuing globalization.''
Deasy also cautioned that buying from PE sources outside of North America - as many processors did for the first time in 2005, because of hurricane-related shortages - may have some unforeseen challenges.
``Things are going to be a little different'' for buyers of foreign PE, he said. ``Now you're going to have to deal with currency exchange risks, reliability of supply, product qualifications, logistics and lead times.
``You're also going to have to make decisions about spot vs. contract buying and how much you want to do. You could be looking at two-tiered pricing.''
PP snaps back
In the PP arena, Townsend's Durand foresees global PP demand snapping back from a sub-par 3 percent growth year in 2005 to average 6.2 percent annually between 2005 and 2010. North America will average 4.5 percent growth in that period, with China averaging 8 percent, he said.
Large chunks of capacity will become available globally later in the decade - 15 billion pounds in 2008 alone and 12 billion pounds in 2009 - resulting in global operating rates dipping below 90 percent starting in 2008, said Durand, who spent nearly 30 years with Shell Oil Co. before joining Townsend in 1996.
In North America, supply and demand will be close to parity by 2010, Durand predicted. The region will enjoy above-average growth for PP in housewares, closures, auto interiors and injection molded containers such as DVD boxes, but demand will be below average in fibers, appliances and auto exteriors.
North American average selling prices for PP should remain at relatively high levels through 2007, but the material's advantage in cost per cubic inch will make it competitive against HDPE, PVC and polystyrene, Durand said.
Additional capacity should be required in North America by 2008, with that demand likely to be met by new capacity from Indelpro SA de CV in Mexico. But the overall PP market has changed.
``We can't look at North America in isolation of other areas anymore,'' Durand said.