The global polypropylene market is more balanced than other commodity plastics, but is facing its own set of regional challenges.
``All global polypropylene production is competitive,'' Esteban Sagel said at Chemical Market Associates Inc.'s World Petrochemical Conference, March 21-22 in Houston. Sagel is director of North American polyolefins for Houston-based CMAI.
``Producers in all the various regions are both able to protect their domestic markets and participate in export markets,'' he added.
``Volume continues to grow at unprecedented levels, but we're still in a high feedstock price environment,'' Basell Polyolefins' Hans-Robert Schmidt said at DeWitt & Co. Inc.' s World Petrochemical Conference, March 20-22 in Houston. Schmidt is senior vice president for polypropylene at Elkton, Md.-based Basell.
``What's happening is that wealthy nations no longer are exhibiting growth, feedstock-owning nations have small populations and populous nations have little feedstock,'' Schmidt said.
A wave of new capacity arriving in the Asia-Pacific and Middle East regions will impact the PP market. In 2009 alone, those areas will add more than 11 billion pounds of new PP capacity.
``This excess capacity will cause operating rates to start dropping in 2008,'' Sagel said. ``They'll be close to 85 percent in 2009 and 2010. Prices and margins also will start to fall in 2007.''
Between 2005 and 2011, PP capacity growth will be around 22 percent in the Middle East but less than 3 percent in North America, Basell's Schmidt said. In that same period, PP demand will grow 9 percent in Eastern Europe and 7 percent in the Middle East and Asia Pacific. North American PP consumption will increase 3.5 percent in that period.
However, the new capacity won't have much impact on North America's regional share of global demand. That number was 38 percent last year but will fall slightly to 34 percent by 2011.
Schmidt added that he believes North America could be a net importer of PP by 2010. Global PP supplies should be tight in 2005-08 before the market starts to loosen in 2009.
In North America, Schmidt said PP operating rates will be above 91 percent in 2007 but under 90 percent from 2008-2010.
North American end markets for PP film, fiber and some injection molded parts could be affected by imported finished goods, Sagel said, since those products are easier to transport. But harder-to-ship blow molded parts, pipe and extrusion coating made from PP ``aren't moving around the world.''
Sagel also pointed out PP's low cost per cubic inch when compared with other resins. At 2.5 cents per cubic inch, PP costs slightly less than PE and quite a bit less than PVC, PS, ABS and PET.
``If polypropylene and other resins perform equally, you're going to choose the one that saves you the most money,'' he said.
Sagel added that he doesn't expect to see much new capacity in North America any time soon.
``There was a lot of pain in the U.S. when the industry overexpanded in 2000,'' he said. ``When you look at lower costs in the Middle East, it's a hard sell for a large new [PP] facility in North America.''
In the short-term, Basell's Schmidt said he's ``not betting'' on a slump in PP pricing or demand in the second quarter of 2007.
``It's not advantageous for customers to destock,'' he said.