The Dutch petrochemicals industry is experiencing a shift away from segments that are set to come under pressure as a result of capacity increases in Asia and the Middle East, but segment where the Netherlands has a technological and cost advantage are set to grow, according to BMI's latest Netherlands Petrochemical Report. In 2008, the Netherlands had 3.98mn tonnes per annum (tpa) of ethylene capacity and 2.44mn tpa of propylene capacity. Dow Benelux accounts for 43% of total olefins capacity, with Sabic Europe contributing a further 30% and Shell Nederland Chemie the remaining 27%. In terms of polymer production, the Netherlands has 780,000tpa of PP, 1.96mn tpa of PE, 240,000tpa of PET, 145,000tpa of PS and 675,000tpa of PVC. The Netherlands also has a large aromatics sector, with nameplate capacity of 2.47mn tpa of benzene, 290,000tpa of toluene, 270,000tpa of cyclohexane, 1.37mn tpa of ethylbenzene, 700,000tpa of cumene and 705,000tpa of xylenes. The Netherlands also has capacity of 1mn tpa of methanol production and 290,000tpa of terephthalic acid. The challenges facing the Dutch petrochemicals include the high cost of feedstock due to high oil prices and the high cost of manufacturing in general due to the higher price of electricity compared to other European countries. Rising project costs are also a major concern. A recent example is Yara's 1.3mn tpa urea plant at Sluiskil, due for completion in 2011, which has seen projected costs rise by a third to EUR400mn. Yet, the size and integration of the Dutch petrochemicals industry enables economies of scale, which means it will sustain interest of investors in some segments where global market conditions are favourable. While BMI does not envisage new olefins and polyolefins plants in the Netherlands in the next five years, producers will focus on upgrading existing production capacities in order to enhance competitiveness with the possibility of incremental cracker capacity projects. Ethylene, PE and PP capacities are to remain static at 3.98mn tpa, 1.96mn tpa and 780,000tpa, respectively. In some segments, output is set to drop, leading to surplus capacity with units likely to be mothballed or closed altogether. Petrochemicals producers are responding to increased capacities in the Middle East and Asia and declining product prices by cutting capacities in the Netherlands. Examples include the switch Dow Chemical's decision to close production at one of its two PS units at Terneuzen in July 2008 and the end of ethylene glycol production at the site, with a switch to ethylene oxide only production. However, other segments are likely to see additional capacity. EO production at Terneuzen will rise to 200,000tpa in 2009 with a concurrent 180,000tpa expansion of polyols capacity as part of Dow's global strategy of expanding its polyurethane business. Shell also raised polyols capacity at its complex in Pernis from 155,000tpa to 255,000tpa in July 2008 in order to retain its position as a major global polyols supplier. Capacity increases in Dutch polyols production is justified on the basis of new technological advances that have increased efficiency in energy consumption and feedstock utilisation, thereby ensuring the Netherlands can retain its competitive advantage. With 71.8 points, the Netherlands is in fifth place out of six countries assessed in BMI's West European Petrochemicals Business Environment Ranking. It is 1.5 points behind the regional average, 0.1 points behind Belgium and 5.5 points ahead of Spain. The Netherlands scores close to the regional average in petrochemicals-
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