The Battleship Polyethylene remains afloat in North America, in spite of a multitude of shots fired across its bow.
North America has had a solid recovery [in PE] and we expect that to continue, said DeWitt & Co. Inc.'s Earl Armstrong. We should see growth of between 2-6 percent from 2010-14, even with exports declining, Armstrong said at his firm's World Petrochemical Conference, held March 24-25 in Houston.
At Chemical Market Associates Inc.'s conference, held on the same days, Howard Rappaport said that he sees growth in the region checking in a little lower at around 2 percent for the next few years, but he added that affordable natural gas feedstocks should give North American efforts a boost.
If the relationship between oil and gas follows the forecasted trend, there will continue to be export opportunities for PE out of North America, but at increasingly competitive prices in the next 12-24 months, said Rappaport, CMAI's global plastics business director.
He added that U.S. producer discipline led to lower operating rates [in 2009], but was crucial in preventing additional inventory builds, which could have led to softer pricing and lower margins.
Globally, PE demand fell almost 5 percent in 2008 and was up only 2 percent in 2009. But Houston-based CMAI expects that growth rate to increase to 5.5 percent from 2009-14, Rappaport said. Armstrong, president of Houston-based DeWitt, pegs global PE demand growth at 4-8 percent from 2010-14.
Some of the factors that helped make the 2009 PE market surprisingly robust Chinese stimulus spending, delays in new Middle East capacity, a weak U.S. dollar and an advantaged feedstock cost position for North America could carry over into 2010 as well, according to Rappaport.
Exports played a huge role in North American PE markets in 2009, swinging high density PE and linear low density PE markets from domestic losses to overall gains, and equaling about 30 percent of total LLDPE sales in the region.
And even though PE export opportunities from North America aren't going to vanish, they are expected to recede as more capacity becomes available elsewhere. Middle Eastern firms are expected to add almost 5 billion pounds of PE capacity this year, with other Asian manufacturers piling on another 8.5 billion pounds. New capacity will outstrip global demand growth through 2011, Rappaport said.
North American PE growth for 2010 will be led by the packaging and film markets and will be followed up by demand returning in durable goods and automotive applications, Armstrong said.
If the North American market does start to decline, producers might not feel the impact for a little while, according to Armstrong, because of the amount of margin that's been restored to the chain due to low-priced ethane feedstock from natural gas.
There's more margin in feedstock than we've seen in a long time, he said.
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