It's not exactly a war zone out there, but it sure is no cakewalk. That is the assessment that Bill Ridenour, president of Polymer TransAction Advisors Inc. (PTA) makes in his latest report covering the first six months of 2011 in the plastics industry. "With oil prices increasing (and likely to decrease) daily due to the instability of the Middle East, placing price pressures on converters and end customers, the plastic and chemical sector is a volatile place to be," commented Ridenour. "We see oil prices continuing to fluctuate during the summer and beyond, barring a successful resolution of the Libyan political crisis."
The short and midterm winner in all of this uncertainty will be olefin resins and other products (and those businesses in the olefin supply chain) which use liquid natural gas (LNG) as a feed stock, as other monomer producers and other users restart idle plants and build new plants to capitalize on cost advantages of products based on LNG over oil-based products, Ridenour explains in his report. LNG is the basis for most olefins in North America. He projects that global investment opportunities will lead to petrochemical joint ventures, acquisitions and internal expansions as resin and monomer producers as well as private equity groups get in on the action. "The short and midterm loser will be China, which until recently was considered a major threat to domestic production of olefinic resins," Ridenour projects....