The world of polypropylene is shifting.
Polypropylene experts from across the globe gathered April 21 in Shanghai. It was evident from the range of companies and nationalities represented that countries that have dominated the market in years past will be faced with new competition, exporters will become importers and new markets will open up.
``The polymer world is changing,'' said Robert Bauman, vice president of polymers for Houston-based Nexant Inc.'s ChemSystems division. ``Energy costs have continued increasing and investment drivers and locations are starting to change.''
As energy costs have continued to rise, new PP plants increasingly are located close to feedstock sources.
``In real estate, they say the three most important things are location, location, location. For petrochemicals it is feedstock, feedstock, feedstock,'' he said at the Centre for Management Technology's Asia/China PP Markets and Tech conference, held April 21-22.
In the United States, for example, no new PP capacity currently is being built. With demand growing at 1-2 percent annually, demand soon could outstrip supply. If no new capacity is built, the United States, historically a net exporter of PP, will have to turn toward imports.
The landscape looks much different in Latin America and the Middle East, said Bauman. ``We are looking at eight or nine new polypropylene plants in Latin America,'' he said. ``We are expecting 3.3 million tons of new capacity starting in 2010.''
The majority of the new capacity will be geared toward export. The desire to move close to feedstock is so great, Bauman said, that even in countries such as Venezuela, where the volatile political situation might make investors skittish, investment is increasing. Two new PP plants currently are under construction in the South American country.
The Middle East also is on track to begin exporting large amounts of PP within the next few years. Until 2005, the region was a net exporter of PP. By 2011, a number of plants are expected to begin operating and change the global PP balance. ``The Middle East will dominate exports,'' Bauman said, predicting that demand will be so great that the region's shipping capacity will have trouble keeping up with its PP exports.
``Freight rates will be a problem; even more so containers,'' he said. ``We do not see how there will be enough containers to ship the polypropylene out.''
In addition to new capacity in those countries, the number of companies producing and exporting PP will increase. When plants start coming on line by 2010, Bauman sees the competition becoming intense.
As new countries start to build capacity, they also will be focusing on new markets, looking East instead of West.
``The polypropylene industry has developed very fast,'' said Weiquan Gu, deputy director of the Petrochemical Planning Division at Beijing-based China Petroleum and Chemical Corp., the state-run business known as Sinopec. ``The capacity is increasing, but demand is increasing even faster - that is why China has become a net importer.''
One out of every 5 tons of PP sold in the world goes to China, Bauman pointed out, and demand most likely will continue to grow for many years to come. Many companies also are expecting India's growing industry to add to PP demand worldwide.
Companies wanting to compete in the new world of PP will have to strive for differentiation.
``There is a new definition of differentiated products: anything that is not made in the Middle East,'' Bauman joked.
Ensuring quality and using the best technology will also help give companies an edge in what Bauman predicts will be trying times.
``It's like a storm is brewing,'' he said. ``But you don't really know how strong it's going to be until it's really close.''