The recovery in Asian prices has been relatively steady, with little change over the last quarter for polyethylene in China. In Europe, the picture has been somewhat different. In response to higher prices, producers have upped output: in the third quarter, propylene production reached record levels. With stocks high, the inevitable result has been a fall in prices.

A fall will help to reduce the widening price differential for product in Europe and Asia. For linear low-density polyethylene, European prices currently stand at about Eur 720 ($699) a tonne, compared with $520 a tonne in China. While for polypropylene, the differential stands at $130. This is well above the historical differential average of about $100 a tonne.

Prices will continue to be constrained by a weak global economy and some over-capacity. 'You don't work out a 20 per cent over-capacity in polyethylene or a 15 per cent over-capacity in polypropylene overnight. It takes time,' says Philip Leighton of Jacobs Consultancy.

However, there is better news on the new build front. The current wave of capacity additions is nearly at an end in the Middle East. Once the Qatar Chemical Company (Q-Chem) plant and the Emir Kabar complex in Iran are commissioned in late 2002/early 2003, there will be a two-year capacity lull before the next round kicks off with the completion of the Jubail United Petrochemical Company complex.