CMI: WORST MAY SOON BE OVER FOR POLYOLEFINS

June 14, 1993
World polyolefins operating rates will bottom out this year despite persistence of robust capacity additions. So predicts Chem Systems Inc. (CMI), Tarrytown, N.Y. Although polyolefins industry still is mired in a global downturn, CMI said several factors indicate the worst may soon be over: More companies are considering mergers, strategic alliances, acquisitions, technology licensing, or feedstock integration in restructuring strategies aimed at cutting costs and improving performance in the

World polyolefins operating rates will bottom out this year despite persistence of robust capacity additions.

So predicts Chem Systems Inc. (CMI), Tarrytown, N.Y.

Although polyolefins industry still is mired in a global downturn, CMI said several factors indicate the worst may soon be over:

  • More companies are considering mergers, strategic alliances, acquisitions, technology licensing, or feedstock integration in restructuring strategies aimed at cutting costs and improving performance in the 1990s.

  • Environmentalists, legislators, and polyolefins manufacturers and consumers are working together to solve solid waste problems, reducing the chances of environmental bans.

  • Polyolefins sales were strong last year, in spite of a world economic recession.

CMI said linear low density polyethylene (Lldpe) and polypropylene makers this year will use about 79% of installed world manufacturing capacity, down from 83% in 1992. Lldpe operating rates will rebound to 81% next year and 88% by 2000, while polypropylene capacity utilization recovers to 82% in 1994 and 88% by the end of the century.

Similarly, high density polyethylene (HDPE) producers will operate at about 81% of rated capacity in 1993-1 percentage point less than in 1992-84% in 1994, and 85% in 2000.

By contrast, operating rates of low density polyethylene (LDPE) plants will remain about stable through the end of the century, slipping 1 percentage point this year to 87% and increasing to 89% in 1994 before falling to 86% in 2000.

OUTLOOK MIXED

CMI said the outlook is mixed for polyolefins because some companies are depending on market growth to bring supply and demand into balance, while others are working on technological advances to extend the capabilities of certain materials.

For example, Lldpe capacity by 1995 will surpass 12.5 million metric tons/year, up from 6.9 million tons/year in 1990. If manufacturers could produce Lldpe with processing properties of LDPE, they could curb LDPE output by more than 2 million metric tons by 2000.

Because polyolefins capacity is being expanded in developed and developing countries, CMI expects interregional trading patterns to change significantly. Thirty new Lldpe manufacturers are expected to begin operating between 1990 and 1995, including 14 in Asia.

As a result, producers in North America in 1995 will account for about 43.5% of world Lldpe capacity, down from 55.6% in 1990, western Europe 15.9%, down from 18.1%, and Japan 6.8%, down from 7.4%.

Meantime, countries in the Middle East and Far East, excluding Japan, by 1995 will have 8.8% and 15.9% of the world's Lldpe production capability, down from 7.6% and 8.2% in 1990.

CMI also expects big changes in trading patterns on polypropylene markets, with combined interregional exports by 1995 decreasing to 915,000 tons from 1.7 million tons in 1990.

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