Huge fluctuations in polymer feedstock prices resulted in wide price disparity of all polymers in 2008

Price volatility in 2008
Despite an announcement by OPEC of a record production cut of 2.2 mln bpd in December, oil prices have collapsed below US$40 for the first time since the summer of 2004 on deteriorating demand. More economic data being released points to a long and severe recession globally. It was previously thought that oil demand may not be affected severely as China and other developing countries are impervious to a global recession, but recent happenings prove otherwise. Demand for oil will stay on the downtrend in 2009, affected by the gloomy global economic outlook and credit crunch, causing commodity prices to fall. OPEC estimates demand to slide even further over the next year - to average 85 mln bpd by end of 2009, crude futures may fall correspondingly. Since 2007, when the financial markets witnessed some problems, equities were not making much capital and not giving returns, huge investments found their way into commodities, inflating oil prices. But as the extent of the US sub-prime mortgage market collapse became clearer, the bubble burst in July, and investors fled commodity markets. Oil prices will begin to recover only in H2-09, as global economy begins to expand.
Immense volatility and fluctuation in polymer feedstock prices was seen in 2008, resulting in volatility and wide price disparity of all polymers such as PE, PVC and PS. Prices peaked during June/July 2008, and making a sudden about turn, sank in the last quarter of 2008. The variation in price of PP from maximum to minimum was more than 200% while the variation for the other commodity polymers was beyond 100%. As prices almost halved in a matter of weeks, buyers were hit by colossal losses due to stockpiles bought at peak rates. This led to caution from the processors, restricting buying in the last quarter. It is difficult to predict the oil price in 2009 but most likely the price will range between US$50-100/barrel. Polymer prices are likely to go up when oil prices rise above US$50/barrel.

New capacity, expansion, acquisition & mergers:

The year 2008 ended with Kuwaiti government calling off Dow Petrochemicals US$17.4 bln JV with Kuwait's Petrochemical Industries Co. Kuwait has termed the JV as "very risky" due to the global financial crisis and crude prices that have tumbled more than 70% since July. The pack up of this JV could have an effect on Dow Chemical's proposed acquisition of Rohm & Haas. Dow may be less willing to pay the initially agreed US$15.3 bln price for Rohm & Haas-an amount agreed upon last summer when energy prices peaked. Dow initially agreed to pay US$78/share, a huge premium over Rohm & Haas' US$44.83 closing price on July 9.
Global economic meltdown and pessimistic markets has compelled Qatar to suspend the progress of its 70:30 joint venture with Honam Petrochemical Corp planned with a capacity to produce 1.7 mln tpa of propylene, polypropylene, styrene, polystyrene and aromatics (xylene).
Dow and Saudi Aramco plan to jointly build a US$26 bln petrochemical complex in Saudi Arabia to cash in on the biggest oil reserves to meet rising polymer demand.
Gulf Petroleum (M) Sdn Bhd and the Perak government plan to invest US$5 bln to build an oil and petrochemical refinery complex in Malaysia . The complex would source its crude oil supplies from Gulf countries and re-export 60% of the output.
Jubail Chevron Phillips Company (JCP), a JV between Chevron Philips & Saudi Industrial Investment Group has commenced startup operations at a world-scale styrene facility in Saudi Arabia. The US$1.2 bln facility produces benzene, ethylbenzene, styrene and propylene.
Iran's Jam Petrochemical Complex (JPC), the world's largest ethylene production unit with capacity of 1.3 bln tpa has come onstream.
Dow Chemical Co and Chevron Phillips Chemical Co acquired joint control of US styrene and polystyrene producer Americas Styrenics, with 1.1 mln ton capacity of styrene monomer. The acquisition makes the JV's capacity the largest polystyrene capacity in the Western Hemisphere.
Dow and Saudi European Petrochemical Co. (IBN ZAHR), a Saudi Basic Industries Corporation (SABIC) joint venture, started the world's single largest PP plant of 500,000 tpa capacity based on UNIPOL™ technology.
LyondellBasell Industries has acquired Solvay Engineered Polymers Inc., a leading supplier of polypropylene compounds in North America.
To meet the rising global demand for biodegradable and biobased plastics growing at over 20%, BASF SE plans to expand production of biodegradable plastic Ecoflex® by 60,000 tpa from the current 14,000 tpa in Germany . Production is scheduled to commence on completion of expansion of the plant in Q3-2010.
Royal DSM N.V. has acquired USA's Polymer Technology Group (PTG) making DSM an important producer of biodegradable polymer.
BASF has plans to acquire Ciba, one of the largest additive producers in the World. The purchase could possibly be completed in Q1-2009.
Dubai-based Taghleef Industries (Ti) and Brückner Maschinenbau GmbH & Co. KG successfully completed the expansion of Ti´s subsidiary in Oman featuring the new high performance 8.7m wide BOPP film production line. The increase of 35,000 tpa adds to a combined annual film production capacity approximating 290,000 tpa. Taghleef Industries has now become one of the largest BOPP film manufacturers in the World.
Jindal Polyfilms has increased its capacity from 90,000 tpa to 176,000 tpa in 2008.
Cosmo Films Ltd. plans expand its capacity from 58,000 tpa to 138,000 tpa by 2010.
Polyplex Corporation Ltd. has ordered 8.7 meters BOPP line with a net output of 35,000 tpa and could run at line speeds of more than 500 meters/min. A BOPP film project to be set up in Uttaranchal, North India is expected to be commissioned by end 2009.
Integrated textile major Nahar Group, has decided to set up a 30,000 tpa plant of BOPP film at Mandideep in Madhya Pradesh at an estimated investment of US$4 mln.
Indorama Thailand has acquired Eastman's PTA and PET assets in Netherlands and The United Kingdom. The company will also enhance its premier position in the polyester business with the acquisition of Tuntex, Thailand's largest polyester manufacturer.