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04. April 2005

Lyondell expects tighter PO supply

Propylene oxide “is moving into a very tight supply/demand situation,” according to Dan Smith, president and chief executive officer of Lyondell Chemical Company, Houston, Texas, USA. Based on current growth rates in the global PO market, Smith estimated that the industry will need a new plant every 18 months to keep pace with demand.
With the present schedule for new PO capacity, including those of Shell (250,000 mt in 2005) and Dow/BASF (300,000 mt in 2008) “it is more like one every 24 months,” he said at the Merrill Lynch Chemicals Conference in New York.
Smith estimates that the industry has been operating at utilisation rates of over 95% and expects this to rise further. “The PO industry typically operates very well at 85-90% capacity utilisation. We can make good money at those rates,” he told the analysts conference on March 16
Lyondell achieved a $100m improvement in its PO business in 2004 compared to 2003, according to Smith. He indicated that margins on PO increased by around 75 % in that period, adding that the recovery has yet to peak.
Lyondell will seek to maintain its world number one position in PO with capacity expansions as needed, commented Smith. But having started up a 285,000 mt PO facility as a joint venture with Bayer in 2004, Lyondell is more likely to build its next plant towards the end of the decade.

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