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John R. Verity
Vice President, Polyolefins Global Business Unit |
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The past year has been an unprecedented period of great anxiety, volatility and change in our industry. The world experienced the sharp rise and fall of oil. The global credit crisis has caused individuals to severely limit their purchasing needs, whether it be a house, car or television.
For corporations, the crisis has meant the shut down of manufacturing facilities, delays in projects, job losses and even bankruptcy.
As a result, sectors of the economy, such as the automotive industry, are in crisis.
In addition, the extraordinary exchange rate volatility further added to uncertainties and risks to the industry.
The cumulative impact of these changes has had a significant impact on everyone.
First, the industry saw a collapse in demand as the various value chains greatly reduce their inventories as a result of the sharp drop in feedstock costs.
Second, the reduced availability of credit continues to have a negative impact on industry members, customers and suppliers.
Finally, each of these factors has been vividly illustrated by the earnings announcements that came out from industry participants and the bankruptcy announcement from a major industry player.
All this serves to highlight that the next few years will be a challenging time.
However, when a long term view is taken, the outlook for the polymer industry remains strong, because of the essential and critical role plastics play in everyone’s lives.
The role of plastics is diverse and ever increasing -- from reducing food spoilage to insulating our buildings. Plastics are also vital to sustainability by reducing waste, conserving energy and fostering a higher standard of living.
The global demand for plastics has grown steadily for many years and will continue to do so for many years to come. Additionally, the future of the industry will stay inextricably tied to the oil and gas industry and the hydrocarbon feedstocks they provide. Even with renewable resource-based plastics growing rapidly, by 2030, 98 percent of the primary feedstock for plastics will remain oil and gas.
This is just a function of the scale of the industry and the cumulative capital already invested as well as the growing demand for plastics and the limited availability of renewable alternatives. For those reasons, the polymer industry will continue to show strong growth as it meets the needs of the people of the developing economies who strive for an improved standard of living.
The fundamental driver for this growth is GDP. The World Bank projects that the earth’s population will increase from more than six billon today to around eight billion by 2030, with most of this growth coming from developing nations.
Over the same period, the global economy is expected to more than double in size to about 70 trillion dollars. This improvement in economic conditions over the long term, particularly in developing nations, will drive an increased use of energy and chemicals.
This economic growth will present tremendous opportunities for the penetration of chemicals, into end-product markets such as automobiles, packaging, construction and health and personal care.
This growing demand for plastics will require an increase in capacity by building new grassroots facilities and expanding on current operations. The location of these capacity additions will be driven by access to either advantaged feedstocks or the emerging markets.
The short term issue is that the bulk of these capacity additions will start up over the next 2-3 years, at a particularly challenging time. As demand drops with the global economic slowdown and these capacity steps come on-line there will be lower capacity utilizations, which is likely to force older, less efficient plants to shutdown as well as drive further restructuring in our industry.
But while the short-term potential for overcapacity looms, when examining India , there are tremendous opportunities for long term growth.
ExxonMobil has had a presence in the Indian market dating back to 1954. Today, for example, the company has an Applications Technology Center in Bangalore, providing product development and new application support to customers throughout India.
There has been rapid economic growth here in recent years with projected continued significant growth. Experts say that the GDP growth rate in India over the next four years is expected to be the second-fastest in the world, rivaled only by China.
This GDP growth is coming from an increase in purchasing power for the emerging middle class. This results from the success of India’s service industries, such as IT software development and support, call centers, engineering and design centers as well as continued development of the manufacturing base of the economy.
The Indian economy is poised for tremendous growth and the prospects for plastic are truly booming as petrochemical growth is amongst the highest in the world. ExxonMobil anticipates double-digit growth for their products to continue for at least the next five years, with the market size gradually assuming greater significance on a global scale.
This is an exciting and optimistic time for Indian growth and ExxonMobil looks forward to being a part of it. |
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