Global markets for polyolefins and engineering thermoplastics will continue to grow, but the world's balance will increasingly shift from North America and Europe to Asia and the Middle East.
That was the message clearly delivered by resin market veterans Tim O'Brien and Chris Hogan at the Plastics News Executive Forum, held March 7-9 in Summerlin.
The global ETP market's 40-plus years of steady growth dipped during the global recession of 2008-09, but has resumed, with demand set to grow 3-8 percent a year through 2015, according to O'Brien.
The number of people living in poverty is reducing, and they all want cellphones and TVs and refrigerators, said O'Brien, vice president at Sabic Innovative Plastics, a global ETP supplier based in Pittsfield, Mass. Long-range car-build numbers also are favorable. All of that creates demand for our products.
Sabic IP ranks as one of the world's largest producers of polycarbonate, ABS and other specialty engineering thermoplastics. The firm also expects growth in consumer electronics items like the iPad and iPhone, O'Brien said.
E-mobility will continue to be a big factor, he said.
Global polyolefin production should increase 5 percent a year from 2011-14, said Hogan, managing director of the olefins and polyolefins unit of Noble Group, a global supply-chain management firm based in Singapore.
Noble generated 2010 sales of almost $57 billion from businesses that include polymers, energy, metals and agricultural products. The firm also recently entered into resin risk management.
Unfortunately, that 5 percent polyolefin production growth rate won't satisfy global demand, which is growing rapidly in the Asian consumer market, Hogan added.
We're seeing a dramatic change in global polyolefins, said Hogan, whose career of 20-plus years in plastics and petrochemicals includes stints with Nova Chemicals Corp. and Arco Chemical Co. There's been increased investment in the Middle East and Asia, and consolidation in Western Europe and North America.
China will become a dominant economy, but its growth rate will slow, said O'Brien, who began his career with former Sabic IP parent General Electric Co. in 1985. India and Southeast Asia also will grow, but will remain relatively small on a global scale.
In Europe, Germany will outpace other countries in the region and remain a hub for manufacturing and product specification, O'Brien added. Eastern Europe and Russia have the potential to become a new China, he said.
China already has become the world's largest polyethylene consumer, with a 23 percent market share, said Hogan. Developed Europe holds 19 percent, with the U.S. in third place with 15 percent. Chinese per capita PE consumption is increasing, while U.S. per capita PE use peaked in 1999 and now is declining, he said.
Chinese domestic PE production, however, only supplies half of that nation's demand, creating a large need for imported material. Hogan also pointed out that most PE imported into China essentially is re-exported in the form of finished products.
Sustainability and reduced carbon footprints will remain focus areas, both O'Brien and Hogan said, and plastics feedstock volatility doesn't appear to be going away any time soon.
Oil is going up and Wal-Mart's not paying more, so what do you do? O'Brien asked The road to bankruptcy is littered with companies that couldn't figure that out.
For engineering thermoplastics, he said North American use of lighter, natural gas-based feedstocks has reduced supplies of important raw materials like benzene and butadiene. Some supplies of benzene also have been diverted away from plastics to the gasoline market, where it's used as an additive. That move has further tightened feedstocks.
There's a multiplying effect from oil into byproducts. Molders and OEMs are looking for simpler, more reliable long-term suppliers, he said.
The advantaged feedstock position of polyolefin makers in the Middle East will allow it to dominate world markets for the near future, Hogan said. He added that it's likely that North American processors will be able to buy Middle Eastern PE at lower costs than from U.S. producers in the next three to five years.
If [Middle Eastern PE] can't find a home in Asia and we're already seeing some of that now it will go elsewhere, maybe to us in the U.S., Hogan said.
Even with that being the case, Hogan said that the Middle East might be facing long-term issues in the polyolefins market. There are signs that the region's natural gas reserves may be limited, he added, and very little new resin capacity is on the drawing board past 2013.
A resin trade pattern that historically has seen material shipped from the U.S. to South America will reverse itself as more capacity comes on stream there, Hogan said.
O'Brien predicted that the U.S. manufacturing base like that of Europe will remain relatively flat but also a significant site for product specification.
The outlook for the Americas is that the U.S. manufacturing base struggles but remains strong, he said. Some work that had gone to Asia comes back to Mexico. The U.S. remains strong in aerospace, health, defense and alternative energy.