MOSCOW (MRC) -- LyondellBasell Industries, the world’s biggest maker of polypropylene (PP) plastic, said "tight" markets for its products may stall the narrower margins that it expects will ultimately come from lower oil prices, as per Hydrocarbonprocessing.
The fundamentals of the US chemical industry have remained "favorable" in October, CEO Jim Gallogly said in the Rotterdam-based company’s third-quarter earnings statement. Competitors’ plant outages are keeping products such as polyethylene in short supply and prices high, he said on a conference call.
"Under those conditions, prices don't fall very quickly," Gallogly said on the call. "The supply chain is tight at this point, and of course the US economy is doing well."
US producers of ethylene and related plastics use natural gas liquids such as ethane as a raw material. While NGLs are cheaper than the oil-derived naphtha used in Europe and elsewhere, a drop in crude prices may undermine that advantage. Brent crude has declined more than 20% since its June peak, meeting a common definition of a bear market.
LyondellBasell customers aren't cancelling orders or cutting inventories in anticipation of lower prices, Gallogly said.
"Recent crude oil price declines are expected to ultimately impact domestic margins, but today’s tight market conditions may delay the timing of potential declines," Gallogly said in the statement. "We are watching to see how this develops."
As MRC reported before, LyondellBasell had delayed the start-up of expanded production at its ethylene plant in La Porte, Tex., until later this year. A mechanical issue with a compressor at the plant was partially to blame for the extended turnaround at La Porte.
LyondellBasell Industries NV is a manufacturing company. The company produces chemicals, fuels, and polymers used for packaging, clean fuels, durable textiles, medical applications, construction materials, and automotive parts. LyondellBasell Industries operates globally and is headquartered in the Netherlands. LyondellBasell is also a leading licensor of polypropylene and polyethylene technologies. The more than 250 polyolefin process licenses granted by LyondellBasell are twice that of any other polyolefin technology licensor.
MRC