The worlds burgeoning middle class has a voracious appetite for polymers and this has compelled other regions of the world to execute a refining and manufacturing buildup that will cause an upcoming oversupply situation. In particular, Middle Eastern and Asian PE and PP capacity will take a sharp upturn, shifting supply patterns and causing margins to fall. Demand for North American (NAm) polyolefin (PO) products will enter what is projected to be a permanent decline as capacity and market share shifts to other longitudes.
Fortunately for US interests, many PO producers have anticipated this and have diversified through significant structural changes increasing access to the far regions of the world. This fact alone should buffer the upcoming downturn in the industry. Projections I have seen suggest that the NAm PO market should be back up to present levels by 2012 as the new capacity operates as price taker rather than a price maker. Eventually for NAm and the EU, finished goods imports will overtake market growth and a period of decline will ensue.
The new world I am describing is projected to happen in 2009. We are about to feel the gravitational pull of the “New Gulf”. The Old Gulf- Gulf of Mexico- will take a back seat to the Gulf in the Middle East.
One weakness of the New Gulf seems to be ethylene. US capacity for the extraction of ethane from natural gas and its conversion to ethylene is an advantage that will buoy NAm PE business for a while. But once Middle East and Asian operators learn to run their plants efficiently, NAm facilities will face the somber truth of the marketplace. NAm will become a net importer of PO’s.
Asian demand for PO’s is growing so rapidly that it may never become a net exporter of PP and PE.
One factor that I do not understand yet is the effect on petroleum supplies and the cost pressures therein. Increased capacity giving lower prices could increase petroleum and gas scarcity resulting in increased prices of petro-energy.
Lamentations on Chemistry 
A somber truth can be seen in the below link. My guess is the run up in crude prices suggests ‘peak oil’ global production has been reached. No, they’re not screaming it from the mountain tops, just buying futures contracts. The pundits assert that the price of oil will be declining ‘any day now’. Of course sell side analysts tell you to buy 10% from the top and sell 10% from the bottom.
To the dullards who scoff at ethanol as an alternative, I suggest you take a look. Only problem with growing corn is that is usually requires petroleum based pesticides and fertilizer. Anyone who knowns of a fertilizer which does not require petroleum let us know. Cow poop works, but you still have to feed the cows. Not sure how efficient animal based fertilizers can be.
http://en.wikipedia.org/wiki/Peak_oil
Hi Bob, It really is hard to get quality information on this topic. I’m presently at a Polymer conference, so I am hearing speakers with what seems to be good data.
As far as EtOH goes, I think that the buzz over cornstarch-based ethanol is turning into a hangover. Cellulosic ethanol is the best path forward and people are beginning to realize this. Former colleagues of mine have launched an EtOH business that is based on cellulosic feedstock from the timber industry. They will start construction of a plant in Oregon this fall.
The only way VC’s would fund them was to switch from corn to cellulosic technology. Cornstarch EtOH is failing to excite investors. Fermenting bacteria aren’t swayed by the congressional-agribusiness complex.
Hi Gaussling: I find the whole EtOH story a bit disappointing – I doubt it is going to save anybody. Nuclear and coal will be the biggest contributors as well as plain old conservation as the price doubles and triples. Are you making a trip out to the wind farms –
while you are in Tejas?
Does EPDM fall under the PO umbrella? Will all of our tires come out of asia? I think EPDM is 40% carbon black – where is that coming from these days?
Honestly – what we want is for the new Gulf to do all the work and for us to hold the patent for the catalysts/technology, then we get paid for their work.
Hi Bill, I should have said “the best path forward for ethanol is…”. Cellulosic ethanol has wildly different and apparently favorable economics, from what I can glean.
The big ideas in the US all seem to be centered on finding ways to support the current obscene rates of resource consumption. We’re wasting energy and time on this tragic effort. The future is electric and we should be moving in that direction. Thorium, MeOH, wind, geothermal, and possibly Fischer-Tropsch liquid fuels are alternatives to petroleum. Then there is more efficient consumption.
And then I woke up ….
Rubber and EPDM is under attack by thermoplastic polyolefins (TPO’s). TPO’s are making real inroads into rubber’s place in the automotive market. Thermoplastic vulcanizates (TPV’s) are TPO’s with islands of xtalline domains connected by hard blocks and soft blocks in sea of amorphous polymer. Such TPO’s are taking market share. It took the automotive market to bring TPO’s on stream. The advantage to TPO’s is that the properties can be prepared in the polymer reactor rather than by further compounding. The disadvantage seems to be cost and poor low temperature impact performance.
The present enthusiasm in automotive polymers is compression of the supply chain. Expect considerable restructuring of the autoplastics supply chain.
I would say that we want a thriving industrial economy with Americans busy manufacturing things. Collecting royalties only benefits the IP shell company shareholders who own the IP.
What do you think is going to happen with the acrylic monomers?
Hi Mr. Isocyanate, You know, I don’t swim in the acrylic waters, so I have no idea what is in store for acrylates. Good question.