markets feature | European polymer demand
A spate of force majeures across the
continent has added to Europe’s
diffi cult supply situation
seen in the fi rst half of 2015. Increasingly, the region is not seen as a focus for the global chemical industry, with the leading players instead directing investment in new capacity to other regions that offer cost advantages in terms of energy costs and/or better growth pros- pects. As polymer manufacturing continues to restruc- ture, reorganise and contract in Europe, so the process- ing industry is likely to see ongoing periods of supply tightness as aging assets struggle to keep going.
Supply realigns The polymer supply industry has already seen signifi - cant rationalisation and realignment of production since 2007 with over 4 million tonnes of capacity closed or mothballed. This has been driven both by the downturn in the market and also by a build-up of new capacity in the Middle East. Some European producers are also involved in these Middle East projects, so are closing older lines in Europe or converting them to produce a more limited range of speciality grades. Since 2013, approximately 1.5 million tonnes of capacity has been closed. This is on top of over 1 million tonnes moth- balled in 2011-2012. In the current round of closures it has been mainly
polyethylene plants that have been closed. This refl ects the changing economics for polyethylene and ethylene production. European producers have been under increasing pressure as their feedstocks are based largely on high-cost naphtha, and competition from ethane-based polyethylene from the Middle East and shale gas-based production from the US is making European production increasingly less competitive. The drop in oil prices in the second half of 2014 and
the weak euro (making imports less attractive and export markets more viable for producers) came too
late for many of the continent’s smaller and older lines, which had already been earmarked for closure.
What is round the corner? A spending spree triggered by the plunge in energy prices helped boost eurozone growth to 0.4% in the fi rst quarter of 2015, as the region took further steps towards a genuine recovery after years of near stagna- tion.
While supply was tight for many materials, overall demand was reported as being up on the previous year. However, it is a little hard to distinguish between genuine market demand and stock building as convert- ers scrabble about for material, fearful that they may be left with empty silos and idle lines. The situation is expected to ease going forward aided
by new capacity in the Middle East and the possible return of the Iranians to the market. Providing the market then picks up again in the fi nal quarter after the summer lull (not always a certainty), growth of 1.3% is expected for the full year. Given the cautious outlook for most European economies, polymer demand over the longer term is expected to average a similar rate of just over 1% per year up to 2019. It will mean that European thermo- plastic demand will still (just) be below the pre-down- turn level at around 39 million tonnes. Demand will mainly be driven by developments in Central Europe where the market is expected to continue growing at nearer to 3% per year while in Western Europe growth will be 1% per year on average.
More information Consumption of polymer by country 2015 18 COMPOUNDING WORLD | August 2015
AMI’s 2015 European Plastics Industry Report is now available as a book or as a PDF. It includes detailed analysis of European demand trends for commodity and engineering polymers, as well as consumption data for downstream processing sectors and on a country by country basis. For more information, including a full contents listing, visit:
http://bit.ly/AMIreport
www.compoundingworld.com
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