"Ethylene and paraxylene are key global commodities that underpin large value chains. There’s no region in the world that will be immune to the effects of the downturn.” Matthew Chadwick, Head of Petrochemicals
It's becoming a crowded market
With a host of new market entrants looking to profit from the petrochemicals boom, supply growth threatens to destabilise the market and will affect profitability. Meanwhile, demand is under pressure as the sustainability agenda takes hold.
Ethylene headed for an extended downturn
Over the last several years, ethylene producers have benefited from healthy profit margins and high utilisation rates.
But that position is starting to change as we head into a supply-led downturn.
Ethylene is highly cyclical. What do we expect for the market out to 2030?
As new entrants join the market to take advantage of strong ethylene demand growth, investments will be made on a massive scale across China, North America and the Middle East. Investment levels will reach a peak around 2023 – 2024.
With these new volumes coming online, global operating rates will drop before they recover around 2025, followed by an upside to the cycle.
Between 2025 - 2030, we expect a significant pull-back in new investments, based on a well-supplied market and declining utilisation and profitability in the previous cycle.
Threat of closure for higher cost assets
Looking forward, higher cost assets will be feeling the pinch as the cost curve gets steeper. Rising crude oil prices and increases in competitive production volumes will put the pressure on margins.
The threat of closure is likely to re-emerge over the next five to seven years.
Paraxylene is already feeling the pinch
The capacity that will be added when Hengli Petrochemical comes online will be the equivalent of twice the annual growth in consumption – more than the whole of North America’s capacity, or the whole of Europe’s capacity – purely in one site.
While ethylene is only just heading into a downturn, paraxylene (PX) is already in the downcycle.
The global PX market was relatively tight up until the first quarter of 2019. All this is now changing as a new wave of capacity comes to market.
The sheer scale of the investments being made in China is simply overwhelming. Two new mega-complexes, Hengli Petrochemicals and Zhejiang Petrochemicals, will add capacity at a scale that the industry has never seen before.
On our recent webinar, we looked in detail at how these mega-investments will affect the PX value chain, and how producers can adapt as this new mega-capacity comes online. Fill in the form on this page to find out more.