The European propylene and ethylene market is expected to remain slow for the rest of 2011, with no signs of a possible recovery amid the rising global economic uncertainty, according to industry sources.
But it is unlikely to go through another market collapse similar to 2008 when the global economy was gripped by the worst financial crisis since the 1930s, they said.
Caution will persist as the upstream energy complex turns increasingly more volatile, keeping both buyers and sellers at bay and the market -- down to the derivatives chain -- broadly subdued, they noted.
'DOOM AND GLOOM' SENTIMENT EASES
The "doom and gloom" scenario has dissipated, an integrated producer said, adding he does not see the market on the verge of a breakdown.
"It will be slow and steady for the rest of the year," he said.
Most sources believe the industry has become more disciplined with their inventory management. One of the key lessons they learned from the crisis years is to keep stock levels as lean as possible so they can react to any sudden changes in demand.
The 2008 global downturn came as a shock to the system, with producers keeping high inventories because of the period of prosperity in the years before, and this made them desperate to get rid of piles of unwanted material when the crisis struck.
PRODUCTION STEADILY CUT
This year, cracker run rates have been steadily reduced in the second half as demand faltered following record-high prices in the first half, owing to soaring oil prices which was mainly triggered by the political chaos in the Middle East and North Africa.
Many sources believe that cracker run rates were further reduced to as low as 70% from around 80-85% during the summer as a measure to adapt to current market conditions. This should help balance the system for the rest of the year, they said.
"It not that bad at all it seems," a trader said, noting that the majority of the industry players he regularly speaks to "seem to be not very negative about the future."
And this sentiment should help ease fear in the market, another supplier stressed.
"When you talk about a crisis, you'll get a crisis. It becomes a self-fulfilling prophecy," he said.
The market has yet to touch bottom, a consumer said, but it is unlikely that it is about to "fall off the cliff."
