NPRA 2010: Global Shifts Heighten Petrochemical Market Volatility

Yonekura Receives Heritage Award

March 31, 2010 - San Antonio, TX

From Chemical Week, March 31, 2010

By Robert Westervelt

Petrochemical makers face continued volatility as globalization and excess liquidity transform the economy, says Hiromasa Yonekura, chairman of Sumitomo Chemical. Yonekura received the 14th annual Petrochemical Heritage Award at the Chemical Heritage Foundation/National Petrochemical and Refiners Association (NPRA) Symposium on Entrepreneurship and Innovation in the Petrochemical Industry, held Sunday as part of NPRA’s International Petrochemical Conference in San Antonio, TX.

“When something happens somewhere people know it immediately and react instantly,” Yonekura says. The origins of the current “great recession” underscore how closely linked global markets have become and how quickly information is transmitted, he says. The crisis started in the U.S. subprime mortgage market and rippled across the global economy. “Markets are becoming more inclined to overreact and being led into a feeding frenzy,” he adds.

Excessive liquidity continues to fuel volatility in financial and commodity markets—including financial derivatives, crude oil, currencies, and metals—and has had a tremendous, and distorting, impact on the world economy, he adds. “Markets historically have played an important role in balancing supply and demand and getting prices right,” Yonekura says. “Awash in capital, however, markets seem to be governed by forces of speculation and this is generating considerable imbalances and fluctuations.”

The volatility is taking a heavy toll on petrochemical makers, he adds. “Increasingly unstable feedstock and product prices has seriously hurt the profitability of petrochemical makers,” he adds. The uneven global concentration of natural gas- and crude oil-based petrochemical feedstock resources adds to volatility, he adds. “A low-cost production position, which used to be a major source of competitive advantage for petrochemical companies, is now a prerequisite to stay in competition,” he adds. “It will become an absolute imperative to build greater resilience to market volatility.” Petrochemical makers can build that resilience by diversifying feedstock resources; maintaining flexible, low-cost global operations; and restructuring product and commercial development processes to better meet fast-evolving market needs, he adds. . . .

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