Editor’s Page: Falling Petrochemical Demand

The world of petrochemicals is approaching a critical time in its history. A cyclical downturn, caused by a build up of new supply in the Middle East and Asia, is occurring at the same time as energy and feedstock prices — while highly volatile — appear to have moved to sustained higher levels. Add into this picture a major credit crisis, a recession in the U.S. and elsewhere, and it is clear that this business cycle could be very different from those of the past. Meanwhile, there are more challenges: consumer environmentalism is taking root in some regions, and legislation to control carbon emissions seems all but certain to become law in Europe and the U.S. in the next few years. For the first time in a long time, the petrochemical industry needs to ask whether it is temporarily facing slower growth in demand or the start of limited demand destruction. The trick will be distinguishing between the two in a fickle and fluid business environment. Some early warning signs are already visible. Year-on-year consumption of the major plastics resins in the U.S. has fallen over the past two years. At the same time, consumption growth for major petrochemicals has turned negative in North America and Europe. Most attention in the…