It may be unsettled times for polypropylene, but ExxonMobil Chemical Co. is celebrating its 50th anniversary of producing the versatile polymer by betting heavily on the resin's continued global growth.
The Houston-based petrochemical giant is investing in PP's future production and technology particularly in the fast-growing Asia-Pacific region, where next year it will open its largest petrochemical complex in the world.
Company officials Larry Gros and Steven Poon shared their views of market conditions and prospects in interviews at Chinaplas in Shanghai. Until April 1, Gros had been ExxonMobil's global PP marketing manager and now is technology manager for global polyolefins. Poon is Asia-Pacific sales manager for PP.
We see long-term polypropylene industry growth in the range of 5-6 percent per year, Gros said, with rates higher in the developing BRIC countries of Brazil, Russia, India and China, and lower in mature markets such as North America and Europe. It appears, he noted, that China's economic stimulus policies have been among the world's most successful, in particular driving strong demand for appliances there.
Poon laid out the numbers: In 2009, China imported 4 million metric tons (8.82 billion pounds) of PP, up 50 percent over the 2.7 million tonnes (5.95 billion pounds) consumed domestically in 2008. Add to that the fact that China's car market is booming and now produces more than 1 million cars every month.
While there are some legitimate short-term concerns about the Chinese economy overheating, Poon said, he still sees the growth as sustainable.
We see PP demand growth in China at about 15 percent per year, for the next five to 10 years, and within the next decade the Asia-Pacific region will account for half of total global PP demand.
By 2015, Gros predicted, China alone will be as large as North America and Europe, combined in PP consumption.
A few factors are contributing to the growth. For starters, Poon noted Beijing's pragmatic approach to its economic stimulus efforts.
You can take an old appliance to a department store and, with a confirmation [of ownership], can immediately get a discount of 8.5 percent on a new model, he explained, suggesting it's easy to implement, with no need for tax rebates and the like, which means consumers can have a direct impact.
PP demand in China also is strong in both rigid and flexible packaging, as well as in non-wovens, especially for products such as baby diapers.
Another factor benefiting ExxonMobil is the pair of recent free-trade pacts that are helping to facilitate imports into China of PP and other products from Singapore and elsewhere in Asia. The China-Singapore Free Trade Agreement was enacted Jan. 1, 2009, and the China-Asia Free Trade Agreement came fully into force Jan. 1, 2010.
ExxonMobil's homopolymer and impact copolymer grades of PP are included in the latter pact, which affects trade between China and the 10 countries in the Association of Southeast Asian Nations, also known as Asean. That pact, which overnight created the world's third-largest free-trade area, has allowed a 6.5 percent duty exemption on products imported from Singapore to China which, Poon said, is allowing us to penetrate China's domestic market more easily.
Elsewhere in Asia, Poon said, Our growth rates in India are growing comparable to those in China, albeit from a smaller base. Vietnam and Indonesia are ExxonMobil's other fast-growing markets in the region for PP resins and non-wovens, supplementing established customer bases in Malaysia and Thailand, he said.
The removal of trade barriers between China and Singapore is of particular interest to ExxonMobil, as it already operates a large petrochemical complex in Singapore, and is in the midst of a multibillion-dollar expansion of that facility that is expected to be complete in 2011. The firm is adding a second, parallel steam cracker on Jurong Island.
Once that expansion is complete, Gros said, it will be our largest petrochemical complex in the company, surpassing Baytown, Texas, and Baton Rouge, La. And so it really is evidence of a shifting footprint to Asia.
Some 15,000 construction workers are engaged in the current building project in Singapore, which is expected to create about 400 factory jobs, along with related jobs throughout the company.
ExxonMobil next year will begin operating, in stages, the second phase of its PP expansion in Singapore, adding 1.1 billion pounds of new capacity. Additionally, that same complex will see the addition of:
* 2.87 billion pounds of polyethylene.
* More than 660 million pounds of metallocene specialty elastomers a significant portion of which will be devoted to Vistamaxx, but that plant will make Exact plastomers, too.
* An expansion of oxo alcohol capacity.
ExxonMobil also started a large joint venture plastics and petrochemicals plant with Saudi Aramco Sino Co. Ltd. in Quanzhou, China, in August.
The firm's investments in Asia don't stop there. It is pumping about $70 million into a new technical center in Shanghai that is due to open by this fall. It will employ about 200 workers.
So where will all this PP go?
It's a cyclical industry, Gros said, while noting how volatile propylene feedstock has been for the past two years. There's a lot of PP capacity coming on line, he said, mostly in the Middle East and Asia. With the recession, it will take a little longer to absorb all that capacity.
Global PP operating rates are probably running at about 80-83 percent, on a static balance across the year, but it feels tighter than that, Gros said.
What of the prospect of North America importing resin?
We see the import of finished goods as affecting the resin consumption demand in North America. As far as resin imports into North America, we've heard some discussions of that, but frankly we aren't really seeing it to any great extent. There are challenges to bringing resin in.
What is more likely, he said, is resin from the Middle East or Asia going to, say, Latin America, which has been an export opportunity for North America.
Meantime at the show, ExxonMobil unveiled its new mPE 35-05 grade of metallocene PE, meant to allow extruders to down-gauge films that also require toughness, stiffness and high clarity.
It also showed three impact-copolymer PP products for the Asian market, all of which will be produced at new Singapore plant:
* PP7555KNE2, a new grade being launched in Asia for thin-wall injection molded rigid packaging.
* PP7684KN, produced in North America for many years, is now being brought to Asia. DuPont said the 20-melt resin offers good stiffness/impact balance for appliances, toys and housewares.
* PP7032KN, an existing grade being introduced to Asia for pallets and consumer products.
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