You’re an oil refinery manager, somewhere in Europe. You can sell diesel for $570/t, or ethylene for $1,120/t. Even given higher costs for ethylene, petrochemical margins are looking a lot stronger than refining margins. So, which are you going to produce?
The auto industry’s importance to the polypropylene (PP) market is growing all the time in Europe.
When announcing a study into adding the equivalent of a new PP plant in Europe, Borealis noted that growing demand for PP from car manufacturers will be a driver for new capacity investment down the road.
Polymers and metals may compete for some automotive applications but the motor industry has been a strong driver of demand for both plastics and a range of metals over the past two years. And the good news is that the support will continue — volume growth bolstering steel, environmental legislation boosting polymers, while re-tooling and new power systems lift demand for some minor metals.
European polymer margins are at their highest level for years after a very strong start to 2015. But does this signify a renaissance or just a short-term fillip for an industry still beset by structural challenges?
The weak euro, steady demand growth and some supply interruptions have created a window of opportunity for producers to lift margins that for years have been below reinvestment levels.