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IHS World Petrochemical Conference 2013 The global renaissance for chemicals

4:41 PM MDT | March 18, 2013

A record crowd of more than 1,200 will meet in Houston this week at the annual IHS World Petrochemical Conference (WPC), the largest gathering of its kind. The meeting focus this year is on the changing global chemicals landscape, as feedstocks drive production economics and demand is driven by global dynamics.

Feedstocks are a dominant portion of overall production cash costs, Gary Adams, chief advisor at IHS Chemical, will tell attendees at WPC. Units that cannot be supplied competitive feedstocks are being closed and plants are being constructed in locations better positioned to supply rapid growth markets. By 2018, IHS expects basic chemical and plastics production to expand to over 950 million m.t./year, a gain of 5%/year.

Demand for basic petrochemicals and plastics has expanded by 4.5%/year since 1990. Growth was slower in 2012, but IHS Chemical forecasts a rebound to 5.8% by 2014 and a slowdown again after that as demand matures.

The cyclical nature of the industry is changing as demand from areas such as China surges. China accounted for 60% of basic chemicals demand growth in 2012, which overall was only 2.7%.

Weak conditions still prevail, but Asia growth will be strong and the outlook for Latin America is positive, based on new raw materials and a strong workforce.

Western Europe, meanwhile, has limited upside, although strong logistics will extend the life of well-placed assets, Adams says.

In the United States, shale has provided a strong advantage, and there is high incentive for integrated investments in olefins and also in vinyls, where low-cost electricity for chlor-alkali is an added bonus. Almost $100 billion in capital investment is likely by 2030 based on advantaged gas-based feedstock supplies.

Refinery-related products, meanwhile, will struggle to compete with imports.

Looking forward, China has become the manufacturing center of the world and the dominant player in core sectors such as textiles and electronics. Demand from the so-called BRICs—Brazil, Russia, India, and China—is more than 50% of total growth since 2010.

Investment in biobased chemicals will total tens of billions of dollars through 2025, forecasts Dave Witte, senior v.p./chemicals at IHS and general manager of IHS Chemical.

Projects and technology development are likely to be supported by careful investors—but in a world of strong commodity chemical economics, there are risks that must be managed carefully.

There is growing dislocation between resource-rich countries and regions where demand is strongest, creating a growing focus on supply chain fundamentals. Significant investment in logistics and infrastructure is planned.

Industry is emerging from downturn that began in 2008 and the cycle peak in 2017. Profits are not evenly distributed and those with advantaged feedstocks will enjoy earnings 20–40% higher than marginal or high-cost producers, Witte adds.

Reports from WPC 2013 can be found on chemweek .com and in future issues.

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