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Australia Petrochemicals Report 2011
Business Monitor International, Nov 2010, Pages: 52
The Australia Petrochemicals Report provides industry professionals and strategists, corporate analysts, petrochemical associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Australia's petrochemicals industry.
The future of the Australian petrochemical industry depends on exploiting its full potential in ethane feedstock, which can be achieved through increased output in the purification of gas for liquefication. Naphtha streams are unlikely to increase substantially due to the declining growth in oil production and the country has yet to leverage its advantages in local ethane availability for downstream industries. Ethylene capacity is to remain at 515,000tonnes per annum (tpa), while PE and PP capacities are likely to remain static at 410,000tpa and 355,000tpa respectively. However, 2010 saw the end of polystyrene production in Australia following Huntsman’s decision in September 2009 to close its facilities, which included 30,000tpa of PS capacity.
The Australian petrochemicals industry is influenced by developments in China, Australia’s main export market for petrochemicals and petrochemicals-utilising products. In much of 2010, China’s production of polymer grew at three times the rate of domestic demand, leading to flat growth in imports. However, we expect a rationalisation of the Chinese petrochemicals industry in 2011, which will have to address the problems of overstocking, lower than expected demand growth and a drastic increase in volumes from the Middle East, and new start-ups in China and Singapore. At the same time, the yuan has strengthened, helping to ameliorate the situation for Australian exports. These factors should help support Australian exports.
Nevertheless, BMI forecasts a slowdown going into 2011 as a result of more sluggish demand in the automotive, consumer goods and construction industries in China and the domestic market. BMI now sees evidence of a bubble in the Chinese property market. If tightening of the credit market continues and the pace of construction abates, the slowdown will lead to zero growth in the PVC segment and slow growth in PE and PP. However, if the bubble bursts and China falls into recession, the consequences for the Australian petrochemicals industry will be more devastating than the 2009 contraction. Australia ranks eighth in BMI’s Petrochemicals Business Environment Ratings for the Asia-Pacific region with 63.4 points, unchanged from the previous year. It lies just 0.1 point behind Malaysia and 1.6 points ahead of India. Although Australia has only a modest petrochemical sector, it scores well in terms of infrastructural development and risk factors. Its score would improve if investors took full advantage of the country’s plentiful gas reserves, which could provide a source of competitively priced ethane feedstock. However, BMI does not think a new world-scale cracker plant will come online in the next five years, so Australia’s score is unlikely to improve in the medium term.
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