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2010 will be a challenging year for global petrochemical producers: Although market demand begins to rebound, a large amount of new petrochemical production capacity from the Middle East will impact the market. However, analysts agreed that the business environment of the global petrochemical industry in 2010 will be better than in 2009.
Mike Devanney, a senior consultant at SRI Consulting, said: "In the event that global economic recovery no longer suffers unexpected shocks, global GDP growth will reach 3% to 3.5% in 2010 or 2011."
Petrochemical producers have stated that the global petrochemical market demand has bottomed out in 2009 and is currently recovering. Mark Eramo, vice president of olefins and derivatives business at CMAI in the United States, said: “The petrochemical market has seen an inflection point and demand has started to pick up, but it is still at a level that is a year and a half ago. There is a big gap, but we can be sure that the market has bottomed out and it is starting to rebound, but the oversupply will still put pressure on the market,†said Ed Gartner, SRI’s senior consultant. “Some petrochemicals, SBR, for example, will not return to its 2007 level until 2012-2013, and other products may not be able to return to their 2007 levels as quickly as 2011."
Due to the large number of newly added petrochemical production capacity in the Middle East, the supply of most petrochemical products will exceed demand in 2010. In 2009, the delayed production of some petrochemical projects in the Middle East helped producers temporarily ease the pressure, but this situation is unlikely to repeat itself in 2010. Analysts said that during the period between 2009 and 2010, about 18 million tons/year of new ethylene capacity was planned to be put into production in the Middle East. However, only about 4 to 5 million tons/year of capacity was actually put into operation on schedule. However, the petrochemical project in the Middle East, which was previously announced to be postponed, is currently beginning to resume work. This effect will be apparent in 2011.
Iramore said: "Demand is recovering, but we will also face more market impacts from the new plant. Petrochemical plants that have been put into operation in the Middle East and some new petrochemical capacity in the Asia Pacific region will be put into production in 2010 and 2011. In 2010, it is estimated that 9 million to 10 million tons/year of ethylene and ethylene derivative production capacity will be put into operation one after another. Even if the global petrochemical market demand will grow strongly in 2010, it will not be possible to completely absorb the additional petrochemical production capacity.â€
Daffany said: “In Western Europe and North America, we have not yet seen the greater impact of the export-led new petrochemical capacity in the Middle East. These New products appear to be entering Western Europe in a gradual and invasive manner. The North American market, however, is bound to put pressure on the operating rate of petrochemical plants in Western Europe and North America from 2010 to 2011."
Industry experts predict that the operating rate of ethylene plants in the world will be around 80% in 2010. Considering that new production capacity will be put into operation one after another, the operating rate of ethylene plants is unlikely to exceed 85% in the next two years. The lower operating rate will eventually squeeze the profits of the producers. Elamet pointed out: "The strong rise in crude oil prices and the lower natural gas prices in North America means that crackers using naphtha as a raw material will face a severe situation." Cracking production of ethane as raw material in the Middle East and North America Traders will continue to maintain their competitive advantage and the spread of naphtha and ethane feedstocks will remain at 8-10 cents/lb ($176-$220/t).
Last year, the price of most petrochemical products in the world continued to rise in 2009 due to the stimulation of crude oil prices from below 35 US dollars per barrel in February to about 72 US dollars per barrel in December. The US ethylene contract price rose from 20.5 cents/lb in January 2009 to 43 cents/lb in December. Ethylene contract prices are expected to rise this year, but the increase should be smaller than in 2009.
Mike Devanney, a senior consultant at SRI Consulting, said: "In the event that global economic recovery no longer suffers unexpected shocks, global GDP growth will reach 3% to 3.5% in 2010 or 2011."
Petrochemical producers have stated that the global petrochemical market demand has bottomed out in 2009 and is currently recovering. Mark Eramo, vice president of olefins and derivatives business at CMAI in the United States, said: “The petrochemical market has seen an inflection point and demand has started to pick up, but it is still at a level that is a year and a half ago. There is a big gap, but we can be sure that the market has bottomed out and it is starting to rebound, but the oversupply will still put pressure on the market,†said Ed Gartner, SRI’s senior consultant. “Some petrochemicals, SBR, for example, will not return to its 2007 level until 2012-2013, and other products may not be able to return to their 2007 levels as quickly as 2011."
Due to the large number of newly added petrochemical production capacity in the Middle East, the supply of most petrochemical products will exceed demand in 2010. In 2009, the delayed production of some petrochemical projects in the Middle East helped producers temporarily ease the pressure, but this situation is unlikely to repeat itself in 2010. Analysts said that during the period between 2009 and 2010, about 18 million tons/year of new ethylene capacity was planned to be put into production in the Middle East. However, only about 4 to 5 million tons/year of capacity was actually put into operation on schedule. However, the petrochemical project in the Middle East, which was previously announced to be postponed, is currently beginning to resume work. This effect will be apparent in 2011.
Iramore said: "Demand is recovering, but we will also face more market impacts from the new plant. Petrochemical plants that have been put into operation in the Middle East and some new petrochemical capacity in the Asia Pacific region will be put into production in 2010 and 2011. In 2010, it is estimated that 9 million to 10 million tons/year of ethylene and ethylene derivative production capacity will be put into operation one after another. Even if the global petrochemical market demand will grow strongly in 2010, it will not be possible to completely absorb the additional petrochemical production capacity.â€
Daffany said: “In Western Europe and North America, we have not yet seen the greater impact of the export-led new petrochemical capacity in the Middle East. These New products appear to be entering Western Europe in a gradual and invasive manner. The North American market, however, is bound to put pressure on the operating rate of petrochemical plants in Western Europe and North America from 2010 to 2011."
Industry experts predict that the operating rate of ethylene plants in the world will be around 80% in 2010. Considering that new production capacity will be put into operation one after another, the operating rate of ethylene plants is unlikely to exceed 85% in the next two years. The lower operating rate will eventually squeeze the profits of the producers. Elamet pointed out: "The strong rise in crude oil prices and the lower natural gas prices in North America means that crackers using naphtha as a raw material will face a severe situation." Cracking production of ethane as raw material in the Middle East and North America Traders will continue to maintain their competitive advantage and the spread of naphtha and ethane feedstocks will remain at 8-10 cents/lb ($176-$220/t).
Last year, the price of most petrochemical products in the world continued to rise in 2009 due to the stimulation of crude oil prices from below 35 US dollars per barrel in February to about 72 US dollars per barrel in December. The US ethylene contract price rose from 20.5 cents/lb in January 2009 to 43 cents/lb in December. Ethylene contract prices are expected to rise this year, but the increase should be smaller than in 2009.
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