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IHS CEH Report : Ethylene (Chemical Economics Handbook 2019)

Download Report IHS CEH Report : Ethylene (Chemical Economics Handbook 2019)

PDF by S&P Global Commodity Insights; IHS Markit

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Format: PDF Language: English Pages: 196 Publisher: S&P Global Commodity Insights; IHS Markit Publitshion date: 2019 ISBN: 108477

Description

Ethylene is the largest-volume basic petrochemical, produced primarily by the steam cracking of hydrocarbons (naphtha, ethane, gas oil, LPG). In 2018, global production amounted to 160 million metric tons. As a major chemical intermediate, ethylene is further reacted to produce a wide spectrum of products. Polyethylene is the single-largest outlet, accounting for 62% of global ethylene consumption in 2018. Other major end uses include ethylene oxide (15%), ethylene dichloride (9%), and ethylbenzene (5%). Ultimately, ethylene underpins several different value chains (polyethylene, vinyls, styrenics, vinyl acetate, etc.) and various economic sectors. Ethylene consumption has been increasingly driven by emerging countries, where the improvement in living standards is prompting an increasing use of a variety of polymers and chemicals. Over the past decade, ethylene consumption has increased at a sustained average rate of 4.1% per year globally. Ethylene production is dominated by large integrated oil and gas companies, large petrochemical companies, and chemical corporations. The 10 largest producers accounted for 46% of the global capacity in 2018 and include DowDuPont, SABIC, ExxonMobil, SINOPEC, and LyondellBasell. Over the past 15 years, there have been some key shifts in global production patterns. Ethylene producer cost-competitiveness lies with access to a cheap source of feedstock and close proximity to fast-growing markets. As a result, new production assets have emerged where large volumes of feedstocks are available at a very competitive price (Middle East, North America), or where markets are growing at sustained rates (Northeast Asia). Northeast Asia was the world’s largest producing region in 2018, with 26% of the global capacity. China, specifically, has been developing its supply base to serve its fast-growing domestic markets, driven primarily by its growing middle class, the improvement of living standards, as well as the development of infrastructure. The Middle East had significantly developed its ethylene supply base in the 2000s, essentially capitalizing on the availability of cheap ethane and exporting the majority of the downstream-produced derivatives. The rhythm of new capacity additions in this region has nevertheless slowed on the back of slowing natural gas field developments. In the long run, the region is contemplating the cracking of heavier feedstock such as LPG or naphtha to diversify its derivatives portfolio and compensate the lesser availability of ethane. North America has now taken the lead when it comes to commissioning new world-scale ethane-based steam crackers. In the region, the natural gas liquids coproduced with shale gas and tight oil (ethane and propane) now offer competitively priced feedstock that is readily available for the petrochemical industry. As a result, the new ethane-based petrochemical project pipeline has picked up significantly in North America, and nearly 12 million metric tons of new ethylene capacity is forecast to be opened through 2023 in the United States. In the past, China actively pursued chemical self-sufficiency and capitalized on its coal reserves as a key strategy. In recent years, however, it has implemented a program of environmental pollution controls that is likely to result in significantly slower growth in coal-based chemicals. Some older, less-efficient units are also projected to close while others will have to relocate to specified chemical parks; newer ethylene investments will therefore increasingly rely on conventional steam cracking technologies. China is projected to account for 39% of new ethylene capacity commissioned through 2023. Western Europe has suffered many years from a combination of higher operating costs and slow-growing markets. The gradual rise in crude oil prices seen until late 2014 combined with the far superior margins seen in other regions has put significant pressure on many Western European producers. The financial and economic crisis of 2008–09 sealed the fate of many smaller, older, nonintegrated and remote-located assets of Western Europe, leading to an average capacity decline of nearly 1% per year. Today, it is believed that most of the necessary rationalizations have been completed and some producers are even contemplating debottlenecking some assets. Since the dive in crude oil prices in late 2014, Western European producers have indeed seen their cost position improve.Ethylene trade is extremely limited globally because of the associated high cost of transportation. In 2018, ethylene trade accounted for only 2–3% of global production. Ethylene is more typically shipped in the form of derivatives, such as polyethylene, vinyls, styrenics, or ethylene glycol. The ethylene industry has benefitted from tight markets over the last couple of years; a combination of delays in new capacity commissioning, change in Chinese coal chemicals strategy as well as a sustained demand growth has led to a situation of constraint. In 2018, global ethylene operating rates amounted to 90%. Over the next five years, China is projected to remain a dominant ethylene producer and consumer. With its recent change in policy and the lower crude oil price environment, Chinese ethylene production growth is expected to essentially derive from conventional production routes rather than coal-to-olefins or methanol-to-olefins units. North America, which has a total of eight projects underway, is projected to account for about 28% of the new ethylene production and demand, as derivatives capacity will be increased in parallel with ethylene capacity. A fairly large portion of the new North American ethylene derivative capacity is set to be exported to other regions, putting pressure on the higher-cost locations. Overall, ethylene operating rates are expected to remain high and markets tight through the forecast period to 2023.

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