The world's polyethylene balance continues to tilt toward the Middle East and other parts of Asia, while moving away from North America and Western Europe.
That first group of regions is making and using more PE as established markets mature, industry analyst Howard Rappaport said at Chemical Market Associates Inc.'s World Petrochemical Conference, held March 21-22 in Houston. Rappaport is global practice leader for thermoplastics with Houston-based CMAI.
More than 40 percent of PE expansions announced for the 2006-11 timeframe are set for the Middle East, Rappaport said. As a result, that region and Asia will have 64 percent of global PE capacity by 2011. The combined market share of North America and Europe will fall from 54 percent to 36 percent in that period.
PE demand growth in Northeast Asia, the Middle East and India will be 7-9 percent from 2006-11, but will be 2-3 percent in North America and Western Europe. Overall global PE demand is maturing, Rappaport said.
``We've seen an extended period of 85 and 90 percent operating rates worldwide, and integrated PE margins have improved in North America since 2003,'' he said. ``But the extended upturn is reaching its summit.
``We're anticipating that PE prices will remain elevated for most of 2007, but will be slightly below 2006 levels. The market will tip in the latter part of 2008, which will lead to lower pricing.''
At the DeWitt & Co. World Petrochemical Review, also held March 21-22 in Houston, Basell Polyolefins' Hans-Robert Schmidt said massive PE expansion in the Middle East and Asia will leave the high density PE market with ``unsatisfactory operating rates'' in 2009 and 2010. Schmidt is a senior vice president of Basell's North American unit in Elkton, Md.
Although HDPE consumption growth from 2005-11 should be more than 7 percent in the Middle East and Eastern Europe - and almost 4 percent in North America - Schmidt said capacity growth is expected to check in at almost 17 percent, with most of that in the Mideast.
The Asian growth - as well as a lack of new capacity in North America - could lead North America to become a net importer of HDPE as soon as this year, Schmidt said. Global supply could be tight until 2010, he added.
At the CMAI event, Rappaport said PE demand is slowing in North America and Western Europe as imports of finished goods made from PE increase.
``Finished products are moving to the lowest-cost locations,'' he said. ``And that's affecting demand consumption rates in North America, Japan and Western Europe. The processor business is changing as finished goods traverse the globe.
``If you look at Europe as an indicator of things to come in North America, PE production and processors aren't going away, they're refocusing. Once they come to realize that commodity grades will come in from offshore, they have to refocus on technology. There will have to be more restructuring and consolidating, but that doesn't mean they're going out of business.''
Globally, Rappaport said China will become more self-sufficient during the next five years, but PE demand there will continue to exceed capacity through 2011.
He also singled out biodegradable packaging as an area of global growth. That market consumed about 90 million pounds of material in 2006 but is expected to need more than 260 million pounds by 2011.
In that sector, polylactic acid is 40 percent of the nonpetroleum-based polymer market. Annual production of PLA could be more than 400 million pounds by 2011, Rappaport said.