Petrochemical sector set for downturn

The global petrochemical industry is expected to experience a downturn this year as a result of an oversupply of ethylene, an important raw material for manufacturing plastics, a top executive of Formosa Plastics Corp (台塑) said yesterday.

Lee Chih-tsuen (李志村), who took over as chairman of Formosa Plastics on Monday, said global ethylene production capacity is estimated to increase 5.44 million tonnes this year, while global demand will grow only 3.9 million tonnes, resulting in an oversupply of 1.5 million tonnes.

Lee said the predicted global demand for ethylene is based on an estimate by Global Insight Inc that the world economy will grow 3.8 percent this year, as the demand for ethylene is closely related to the world economy.

Lee noted that China and the Middle East are leading all other areas in the expansion of ethylene production capacity, accounting for 85 percent of the world's newly added productivity.

He pointed out that Iran alone plans to build 13 ethylene plants to cope with its petroleum surplus and that the completion of these projects in 2009 will cause difficulties for the global petrochemical industry.

Ethylene is made by cracking hydrocarbons from petroleum. It is used as an intermediate in the manufacture of other chemicals, and can be polymerized to make polyethylene -- the world's most widely used plastic.