Players gather at ChemOrbis 3rd Turkey Polyolefins Conference
Among the main topics discussed by the presenters were the impact of lower energy costs on polyolefin economics, perspective changes in international trade patterns, future strategies of players throughout the globe and the impact of plastics on the environment.
Regarding the impact of lower energy costs on the polyolefin production chain, Mr. Alex Lidback of Wood Mackenzie predicted that oil prices would steadily increase over the next two years to breach $60/barrel by the second half of 2017, driven by rebalancing supply and demand dynamics. Mr. Lidback predicted that global supply growth would slow in 2016 and go into reverse in 2017, helping to support firmer prices.
Mr. Udo Jong of the Boston Consulting Group commented that declining crude oil prices had resulted in significant reductions in the cost advantages enjoyed by American producers over their European counterparts, estimating that production costs for European based naphtha crackers are three times as high as the costs for American based ethane crackers with oil at $49/barrel whereas European production costs were as much as eight times above the US average with oil at $127/barrel. Mr. Jong argued that shifts in costs had created a temporary advantage for European producers while adding that the European industry still needed to take further actions to preserve a long-term competitive position.
Regarding adjustments in global trade volumes, Ms. Belkis Tamakan from LyondellBasell argued that additional PE plants being built in North America would need to direct around 4 million tons of PE per year to China by 2020 as Latin American economies were unlikely to grow fast enough to absorb additional PE production from the US. Mr. Stewart Hardy from Nexant argued that producers in North America and the Middle East were acting to preserve their competitive advantages by shifting new investment into specialty rather than commodity polyolefins while also arguing that Chinese coal-based capacities would perform stronger financially than some commenters have suggested, arguing that operating costs are the key metric in assessing the viability of Chinese coal-to-olefins producers.
Touching on questions of how players across the global industry would face the challenges confronting them, Mr. Masoud Sayehban from Iran’s NPC argued that Iranian producers were seeking to diversify their product mix as well as expand their overall capacities, adding that the total share of ethylene devoted to PE production in Iran would fall from 76% in 2014 to 69% in 2019 while the share of Iranian propylene devoted to PP production would fall from 93% in 2014 to 82% in 2019. Regarding developments in the Turkish processing sector, Dr. Mevlut Cetinkaya from Petkim argued that Turkish converters are gradually shifting to greater value added products even as the sector continues to struggle with capital shortages and problems processing longer term payments.
Touching on the environmental impact of plastics, Mr. Kurt Kuruc from Farmamak argued that focusing on downgauging and reducing packaging consumption were misguided and that Turkey could raise its per capita packaging consumption without negatively impacting the environment by focusing on timely use of polyolefin packaging solutions. Mr. Yavuz Erogulu from Turkish industry association PAGEV also argued that plastics have an important part to play in creating a sustainable and prosperous future and that new innovations in plastics could help reduce emissions in the transportation and insulation sectors.
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