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Sales volumes of ethylene and derivatives to remain low

July 07/2009
 
         
Absence of clear signs of a rebound in cyclical end-user markets such as construction and housing, automotives, and those markets depending on discretionary consumer spending, Fitch Ratings expects low sales volumes of ethylene and its derivatives for the remainder of 2009, as detailed in a report. A potential 2010 recovery will only be slow and gradual rather than v-shaped.

The recovery will be particularly lengthy in polyvinyl chloride (PVC) segment given PVC"s high dependency on the housing and construction sector. Renewed discussions to implement bans for the use of polystyrene (PS) in fast-food containers also cast doubts on recovery prospects for PS.

Prospects are moderately better for high-density polyethylene (HDPE) and low-linear density polyethylene (LLDPE). While sales volumes for both materials were adversely affected by the economic downturn, HDPE and LLDPE may benefit from less cyclical end-user markets, particularly in the food and packaging sector.

Even in the event of a rebound, the economics of the ethylene value chain may remain under pressure as new global capacity additions, particularly in the Middle East, come onstream which benefit from low-cost access to feedstock. As a result, production capacity, especially smaller and older steam crackers, will be idled or permanently shut down along the U.S. Gulf Coast. North American producers will also continue to seek alliances and joint ventures with players from the Middle East.


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