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CMAI: Petrochemical Industry Facing Tough Times
7:46 PM MDT | March 29, 2009 | By LINDSEY BEWLEY
The global economic recession comes at a difficult time, especially as new capacity comes onstream and demand weakens, Gary Adams, president of CMAI (Houston), told attendees at CMAI’s 24th annual World Petrochemical Conference in Houston last week.
The petrochemical industry will react to over-supply by continuing to implement cutbacks and rationalize capacity. “The global market is becoming completely overwhelmed with these new supplies, especially given current recessionary demand,” Adams said. “This is the most severely oversupplied market since the early 1980s.”
Excess capacity will need to be absorbed in order to balance the market and some producers may have no choice but to close underperforming assets, he said, mentioning that up to 50 million m.t. of capacity may eventually need to be idled in order to balance the market by 2013.
“Weak economic conditions can not be overcome in time to prevent heavy losses for some,” he added. “Older capacity will be closed and businesses consolidated, leading to a recovery that should occur by 2012 or 2013.”
Demand for basic petrochemicals and plastics has expanded by about 4.5%/year for the last 20 years, CMAI says. “Though this pace of growth has recently slowed, it should return by 2011 and then slow somewhat thereafter as demand growth flattens and declines in developed countries,” Adams said.
One of the more challenging issues for the industry is demand loss across the petchem value chain. “We’re in for a disappointing period of demand growth for basic chemicals and plastics until consumers return to spending,” Adams said. “Recovery is not going to begin until consumers of the world begin to feel positive about the future.”