Plastics News senior staff reporter Frank Esposito wrote the following items from Chemical Market Associates Inc.'s World Petro- chemical Conference, held March 24-26 in Houston.
Economy won't slow
Saudi Aramco growth
The slowing global economy hasn't cooled Saudi Aramco's expansion plans for plastics and petrochemicals in its native Saudi Arabia and beyond.
In Saudi Arabia, joint ventures with Houston-based ConocoPhillips Co. in Yanbu, Paris-based Total Petrochemicals in Jubail, and Midland, Mich.-based Dow Chemical Co. in Ras Tanura will add production of a variety of plastic feedstocks and resins between 2013 and 2015, according to Abdulaziz Al-Judaimi. Al-Judaimi is Saudi Aramco's vice president of new business development.
Saudi Aramco, based in Dhahran, also will open a plastics and petrochemicals joint venture in China's Fujian province later this year with ExxonMobil Chemical Co. and Beijing's Sinopec. In total, Saudi Aramco's current project slate will yield almost 30 billion pounds of annual capacity for a host of petrochemical products.
The Ras Tanura site will include downstream plastic processing units as part of Saudi Aramco's “holistic approach,” which Al-Judaimi said combines a commercial, national and global commitment to create jobs for Saudi Arabia's young and growing population. The firm also wants to maximize local content for pipe, fittings, electrical equipment and similar products.
“We remain committed to these plans even in this changing business environment,” he said.
The 76-year-old firm — 100 percent owned by the Saudi government since 1988 — holds the world's largest oil reserves and fourth-largest natural gas reserves. That equates to 25 percent of the world's total oil reserves and 10 percent of total oil production.
China resin demand
faces slow recovery
Although China will remain “the world's most cost-effective factory floor,” the growing nation's demand for plastics resins likely won't speed up until after 2011.
“Exports are declining, and the government is concerned about unemployment leading to social unrest,” said Paul Pang, Chemical Market Associates Inc.'s managing director for China. “But some government policy changes also are having a negative impact on exports.”
China's plastics demand is set to total almost 90 billion pounds by 2013. Some of this demand will be met by a dozen new petrochemical projects under way by state-owned Sinopec and PetroChina Co. Ltd., both based in Beijing. The firms are following different strategies, with Sinopec placing six locations next to end markets, and PetroChina adding six next to resources needed to run the plants.
“One will have to import oil, and the other will have to ship products,” Pang said.
China became the world's third-largest economy in 2008, tied with Germany and trailing only the U.S. and Japan. But its gross domestic product growth slowed to 9 percent, and 50,000 factories have closed since mid-2008, sending 27 million mostly migrant workers back to the Chinese countryside.
The Chinese government has responded with a $585 billion stimulus package for 2009 and 2010. Although only $15 billion of that amount is earmarked for the petrochemical sector, half of the spending will go to infrastructure, which will drive petrochemical demand as a result, Pang said.
Demand is expected
to fall for PC, nylon
Lower demand is expected to keep global operating rates for both polycarbonate and nylon under 90 percent for the near future.
Excess PC capacity — including a massive 570 million-pound-capacity unit from Saudi Kayan Petrochemical Co. that launches in 2011 — will send global operating rates to 70 percent by 2012, said Adrian Beale, CMAI global engineering resins director. Saudi Kayan is in Jubail, Saudi Arabia.
The global PC field has been hard hit by a decline in demand for CDs and DVDs, which had made optical media the largest end market for PC use. Increased downloading of both movies and music soon will push optical media from that top spot, Beale said.
The introduction of Blu-ray DVD technology will help somewhat, but overall “will only lead to a more orderly decline,” according to Beale.
Concerns about bisphenol A in baby bottles and other types of packaging will impact PC demand in that sector. Potential growth could come from uses in auto parts and sheet and film. Beale estimated global PC capacity in 2008 at about 7.3 billion pounds.
The market “will need a major new application,” which Beale said could come in the form of automotive window glazing, although some performance improvements are needed there.
In nylon, Beale said the fibers market remains in decline because of competition from polyester. About 60 percent of the world's 5 billion pounds of annual nylon resin output goes into the fiber sector.
The remaining 40 percent goes into engineering plastics uses, which also are down because of the depressed automotive market. As a result, global operating rates for nylon 6/6 resin are expected to be around 80 percent through 2013, while operating rates for nylon 6 resin will be slightly below that level.
An opportunity for nylon could arise, Beale said, from smaller fuel-efficient cars that will need higher-heat materials for their smaller parts. Rising mileage targets also could help nylon demand by placing greater focus on reducing weight and on metal replacement.
“The market will be growing because of engineering resins, not because of fiber,” Beale said.
PET bottle resin use
continues to decline
A combination of lightweighting and lost bottled-water demand will reduce PET bottle resin per-capita consumption significantly in North America during the next few years.
That's the view of Chase Willett, director of polyester and polyester raw materials at CMAI.
“Historically, PET has been the darling of plastics in growth terms,” Willett said. “But it got a bitter taste of reality in 2008.”
The turnaround occurred partly because water bottle weights fell from 15 grams — slightly more than one-half ounce — to 12 grams and then to less than 10 grams for a bottle that holds 500 milliliters (15 fluid ounces). Willett said this trend will continue into 2010 as soft drink and sports drink bottles are lightweighted.
“Consumers continued to shift away from soft drinks and sports drinks to water which uses less PET,” he said. “Consumers also shifted toward energy drinks, which are typically packaged in cans.”
Reduced consumer spending was even more damaging to PET, since it took its toll on single-serve beverages as consumers switched to lower-priced bulk packages such as 2 liters — which use less PET per liquid volume — and multipacked cans sold at club stores and discount retailers, Willett added.
Another “frightening trend” he identified was a drop in bottled-water demand of 5 percent or more, which occurred as consumers appeared to shift to tap water — to reduce their spending and possibly their environmental footprint.
“Some bottled-water demand is lost forever, as consumers shift back to the low-cost tap and never pick the bottle habit up again,” Willett said.
Lower demand leads
to ethylene surplus
Global ethylene operating rates are expected to be under 85 percent through 2011 before rebounding to 90 percent by 2013.
Lower demand also will create an ethylene surplus equal to 14-16 percent of world capacity from 2009-11, said Mark Eramo, CMAI's executive vice president of market advisory services. At its peak, this surplus will equal about 40 billion pounds of ethylene.
High-cost ethylene assets will be idled to match supply with demand. As a result, North America is expected to shut down more than 9 billion pounds of ethylene capacity in the near future.
Although 2008 saw the first contraction in global ethylene demand since the early 1980s, global capacity — led by new projects in the Middle East — should surpass 300 billion pounds by 2013. North America's use of low-priced natural gas to produce 53 percent of its ethylene should be an advantage in the near future.
“Natural gas is back,” Eramo said. “Under the right conditions, North American ethylene derivatives can compete in international markets.”