In the first 11 months of 2010, production of major plastic resins totalled 69.2bn lbs, up 3.6% y-o-y. Sales and captive use of major plastic resins totalled 68.7bn lbs, an increase of 3.3% y-o-y. There were significant variations between polymer segments with PVC and LLDPE reporting strong growth while HDPE and PP markets contracted. Even in segments where sales declined, the weakness of the US dollar prompted an increase in production in the first few months of the year, although the recovery in the exchange rate later in the year reversed the tre chrysler egory/audi">audi nd. Polymer resins output growth of around 3.4% in 2010 was below BMI's projection of 5.0% with Q410 figures far lower than we had expected. The rebound will moderate further in 2011 and 2012 a auto part nd output may not return to pre-recession levels until 2012 at the earliest. We have raised our forecast for real GDP growth in 2011 to 2.8% from 2.0% and see modest upside risks in the light of payroll tax cuts and extension of unemployment benefits.
US olefins producers using ethane as feedstock are likely to extend their competitive edge over producers in other developed states over the medium- to long-term. Overall, we see gas production holding its own to 2015, helped by the exploitation of shale gas deposits. The assurance of a long-term source of supply for feedstocks was factored into some companies' decisions to make major investment, including Eastman Chemical's decision to restart the previously idled ethane cracking unit at its Longview, Texas complex ahead of schedule. The restart increases Eastman's olefin capacity by 225,000tpa and brings the total number of active cracking units at Longview to three. Eastman stated that the restart was prompted by an improvement in market conditions for olefin feedstocks which it expected to continue over the next several years. Eastman has four ethylene units at its Longview complex, with ethylene capacity totalling about 840,000tpa. Meanwhile, Bayer is seeking an investor to use its land in West Virginia as a site for a new ethane cracker to take advantage of ethane produced from shale-gas in the Marcellus shale deposits.
The industry had already seen excess capacity removed from the market ahead of the economic crisis, helping to tighten the polymer market and prevent prices from falling to lower levels. However, despite the availability of cheap ethane feedstock for existing cracker capacity, the prospects for further shutdowns are certain as the US struggles to compete with suppliers in the Middle East and Asia and domestic demand growth remains sluggish. Companies dependent on purchasing feedstock on the market, such as US-based Dow Chemical or LyondellBasell, are more vulnerable. BMI believes that producers are continuing to operate some uncompetitive capacity in the hope that competitors will close their plants. The US petrochemicals industry is likely to see a decline in capacity - particularly in commodity products - over the medium-term, but the focus will be on improving added value through technological innovation. BMI expects increased investment in R&D and technology-driven joint ventures (JVs), mergers alfa romeo and acquisitions. A major area for innovation is light-weighting packaging and plastics, which are an alternative to metal in certain products and applications, particularly in the transportation industry.
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