Global changes in feedstock patterns for polyethylene and polypropylene present U.S. producers with a number of challenges related to supply, their traditional role in world markets, pricing and finished goods, said Howard Rappaport, global practice leader for thermoplastics at Houston-based consulting firm Chemical Market Associates Inc.
The U.S. and Europe need to prepare for a paradigm shift in which their countries become net importers and in which the Middle East becomes a net exporter, Rappaport said at the Global Plastics Environmental Conference, held March 6-7 in Orlando.
By 2011, CMAI projects, the U.S. and Europe will have capacity to produce just 40 percent of the global supply of basic chemicals and plastics compared with 70 percent seven years ago.
Rappaport said that when new capacity in the Middle East and China comes on-stream sometime in 2009, prices of natural gas, propylene and low and high density PE will begin to fall before they bottom out in 2011.
He said natural gas prices will decline to $6.16 per million Btu in 2011 from today's level of more than $7. But that still is far above the $3-$4 paid at the beginning of the decade, and will keep U.S. producers at a raw material price disadvantage compared with companies in the Middle East, where natural gas prices are around 75 cents per million Btu.
``Even after prices fall, natural gas prices will be significantly higher than in past decades and will have a significant effect on U.S. markets,'' Rappaport said.
What's more, as China adds capacity, it will be forced to export even more to keep its capacity utilization up, resulting in greater price pressure on U.S. resin producers. China already exports more than $5 billion in finished plastics goods to the U.S., and to keep those plants running, it is the largest importer of recycled plastics, at 11 million pounds annually. That will remain the case four years forward, even though Chinese resin makers Sinopec and PetroChina will rank among the world's 10 largest PE producers, combining for about 10 percent of global capacity, he said.
