Chemicals profit should more than double globally by 2016 as rising Asian demand for plastics and other products outpaces supply additions in China, the Middle East and North America, a consultant said.
Earnings will remain above $150 a ton for three years beginning in 2015, peaking near $200 in 2016, compared with about $75 a ton this year, Mark Eramo, a vice president at IHS Inc., said in a presentation distributed before he spoke at the IHS World Petrochemical Conference in Houston. The peak will rival the record earnings of 1988, according to the presentation.
Industry earnings have been recovering since reaching a trough in 2009, according to Eramo’s presentation. North American earnings were less affected by the downturn because of the availability of low-cost natural gas to produce chemicals.
“By 2013, the global industry will begin the transition to the next up-cycle, returning to very high profit levels, potentially outperforming previous periods of strong earnings,” according to the presentation.
Chemical demand growth of about 4.5 percent a year will increase global operating rates in 2015 to 90 percent, a level that represents tight markets, according to the presentation.
Laurence Alexander, a New York-based analyst at Jefferies & Co., said the forecast compares with his expectation for peak earnings in 2014 to 2015.
“IHS seems more optimistic the 2016 peak will compare with the late 1980s and be slightly above 1995,” Alexander said in a note today.
BASF AG, Saudi Basic Industries Corp. and Dow Chemical Co. are the three biggest global producers of basic chemicals, according to Bloomberg Industries.