The litmus test for the global economy

EU’s PE industry could benefit from cluster strategy

EU PE Nov11.pngEurope’s polyethylene (PE) trade presents a fascinating patchwork, based on its geographic and historical trading position, overlaid with its multi-ownership structure.

This is highlighted in the above chart (based based on trade data for the January-August period from Global Trade Information Services, the leading global supplier). It shows net trade (exports less imports) for the combined EU 27 countries. Key highlights are:

• The overall trade balance is volatile. It was +306kt in 2009 (green column), but -408kt in 2007 (dark blue) and -338kt in 2011 (light blue)
• The Middle East balance is strongly negative, as would be expected. Saudi imports have been stable at ~750kt, but Iran’s have halved in 2011 versus 2010 to 150kt, whilst Qatar’s are up 70% versus 2010 at 150kt
NAFTA’s balance is also negative, but has reduced from -210kt in 2007 to -150kt in 2011. The main reason is lower imports from the USA
Latin America’s balance has become marginally positive, moving from -111kt in 2007 to +3kt in 2011, due to increased exports to Brazil.
FSU’s balance is stable at +250kt, due to exports to Russia
NEA’s balance has halved to +30kt versus 2010, due to lower exports and higher imports
SEA’s balance is now negative at -31kt, due to increased Thai imports
India’s balance is lower at +30kt, with exports lower/imports higher

EU producers have clearly been successful over the past two years in remaining competitive, despite suffering a high naphtha feedstock price versus ME/NAFTA’s advantaged ethane cost. This has been due to the higher prices achieved for co-product propylene and butadiene.

The outlook for 2012 looks less favourable, however, particularly if the domestic market slows as a result of the current debt crisis.

But companies could try to compensate for this by pooling resources within key regional clusters, to benefit both producers and consumers. This opportunity needs now to be progressed urgently, if companies are to maximise its potential benefits.