/ 3-Day Training

Price Forecasting Techniques & Trading Strategies for the Petrochemical Industry

Singapore, SG | August 13-14

/ 3-Day Training

Singapore | August 13-14

Singapore | August 13-14

Cutting Edge Chemical Sustainability Insights

Challenging H2 outlook for olefins: The supply/demand imbalance is likely to intensify unless start-ups are delayed

Despite continued year-over-year improvement in demand, conditions in the global olefin markets will remain challenging during the second half, according to market players and analysts. Capacity rationalizations in Europe are expected to have little impact on the regional scene, while the global supply/demand imbalance will continue to intensify, particularly in China.Ethylene demand in Europe is expected to remain weak during the second half and supply to remain long. Rationalization will begin, with ExxonMobil removing 425,000 metric tons of ethylene capacity by shutting down its steam cracker in Gravenchon, France and Sabic removing another 530,000 metric tons of capacity by shutting down its steam cracker in Geleen, the Netherlands. However, market sources do not expect to see much impact from the two closures. "The effects on the market will be minor," a producer told Commodity Insights. "The whole market will continue as it has in the first half of the year, although the reasons may change."More rationalization could be in the works. During the second quarter, LyondellBasell Industries announced a strategic review of its European assets, citing expectations of long-term challenging market conditions and increasing cost pressures from European regulations.Ethylene producers in Europe have low expectations of a demand recovery in the second half, with plans to keep cracker run rates at reduced levels despite the upcoming rationalization. Derivative appetite is also expected to remain low, with consumers maintaining reduced contractual volumes."The rationalization in Europe is a good start," said Andy Orszynski, director/olefins and derivatives at S&P Global Commodity Insights, "but it is barely scratching the surface in solving the global oversupply picture."The Asian ethylene markets are expected to remain under pressure, with naphtha-fed steam crackers in particular struggling to balance feedstock costs and derivative margins. Given the weak macroeconomic outlook, buying appetite is set to remain lackluster, leaving supply long, even with most crackers maintaining reduced run rates."Overall consumption of finished goods is likely to remain capped, as the post-coronavirus recovery has yet to really take off," said a trader based in Northeast Asia. "Inflation remains high, and economic growth is slow, which will continue to impact consumer spending as well as major infrastructure projects that tend to drive downstream demand and market sentiment. This will all eat into ethylene demand."With production margins for key derivatives such as polyethylene, ethylene glycol, styrene and polyvinyl chloride in negative territory, the ethylene complex is expected to remain soft. Commodity Insights expects producers in the region to delay most new steam cracker start-ups into 2025 and beyond, so that only two new crackers will begin operations during the second half of 2024.Ethylene supply has been long in the US as well, so pricing there was stable during the first half despite production issues. Unless there is significant change in downstream demand, prices are expected to remain stable in the second half, market sources said.No changes in cracker capacity have been announced for the remainder of the year, but it remains to be seen whether hurricane season, which extends from June through November in the US Gulf Coast, will affect run rates. As for demand, Enterprise Products Partners expects to bring online the 50% expansion of its 1 million metric tons (MMt) per year ethylene export terminal on the Houston Ship Channel. The company has also announced plans for a second 50% expansion during the latter half of 2025. The impact of increased export levels remains to be seen; it is unclear how they will affect trade flows given capacity shifts in Europe and Asia, according to Walt Hart, executive director/olefins, Americas at Commodity Insights.Propylene supply surging on PDH start-ups Conditions in Europe’s propylene market were volatile during the first half of 2024. Looking ahead, the volatility is expected to diminish as trade flows that were diverted by security challenges in the Red Sea normalize. But while market players expect year-over-year gains in demand to continue, underlying oversupply and weakness in key derivatives will limit any broad improvement in market conditions.Europe continues to command significant premiums to Asia and the Americas, raising concerns that the continent will be exposed to competitive import availability if security in the Red Sea improves.Supply of downstream polypropylene (PP) is expected to remain tight due to reduced imports and outage-driven restrictions on domestic availability, but weakness in underlying demand from the key construction and automotive sectors is likely to mitigate any recovery in buyer appetite. "Any easing of [propylene] conditions will impact the PP industry in provoking bearishness, exacerbating oversupply," one PP producer told Commodity Insights. "We were more optimistic for Q2 than we are now for the rest of the year."As in the ethylene market, capacity rationalization remains a dominant factor in the outlook for Europe, and speculation on further shutdowns will continue to weigh on industry confidence.In Asia, new propane dehydrogenation (PDH) capacity will further lengthen an already oversupplied propylene market, exacerbating price pressure amid tepid demand.S&P Global Commodity Insights expects four Chinese PDH plants totaling 2.61 million metric tons to start up in the second half, joining the five units totaling 3.6 MMt that went online during the first half. China, a key demand outlet in Asia, may lower its appetite for imported material, and with propylene derivative margins already squeezed by subdued end demand, the result is likely to be minimal spot buying.China’s PDH expansions will also strongly influence trade flows in PP as the country shifts to a net export position. Four new plants totaling 1.25 MMt per year of PP capacity are slated to start up in China during the second half, including Sinopec and Ineos’ 350,000 metric tons per year Tianjin line and ExxonMobil’s two 450,000 metric tons per year Huizhou lines.Traders have been noting aggressive offers for China-origin PP homopolymer cargo in Southeast Asia. "The China-SEA freight situation is not nearly as bad as costs to ship to the Americas and Europe, which makes trades more workable," a Northeast Asian trader said.In the Americas, feedstock propane prices are expected to stabilize during the second half, which could help stabilize propylene spot pricing, Hart said.The market has expressed a similar sentiment, with one source anticipating stable-to-bearish pricing as long as production is kept balanced. Another source said that increased diversification of demand is likely, with various derivative units coming back online and expanding the downstream consumption base beyond traders.Downstream, PP market participants expect challenging fundamentals as new capacity comes online during a period of lackluster export demand.Formosa Plastics Corp. will bring its new 250,000 metric tons per year PP plant online at Point Comfort, Texas in July, according to a source familiar with company operations. At the same time, the existing PP unit at the facility will be taken offline for maintenance to be completed in the third quarter.Elevated propylene pricing has been making it difficult for US exporters to compete with Asian-origin PP material. Run rates have been reduced below 80%, and they are expected to remain there during the second half as producers focus on domestic sales. This article first appeared in Chemical Week

Europe’s ethylene rationalization begins, more closures needed

The closures of ExxonMobil Corp.’s steam cracker at Notre Dame de Gravenchon, France, and one of Sabic’s two crackers at Geleen, Netherlands, which were announced separately on April 10-11, are not expected to make big inroads into the huge ethylene and propylene overcapacity in Europe and worldwide, but the two moves are considered significant because they could be the first steps in the long-awaited rationalization of Europe’s olefins industry. Rationalization has been looming since China’s huge petrochemicals capacity overbuild, which started to accelerate in about 2020, collided with the economic disruption and slowdown caused by the COVID-19 pandemic and was exacerbated by Europe’s historically high energy and feedstock costs, made worse in the past two years by Russia’s war in Ukraine.Naphtha is the main feedstock for steam cracking in Europe and Asia, which puts these regions at a competitive disadvantage relative to regions that use predominantly ethane, such as the Middle East and US."The ethylene industry has overbuilt itself," said Tony Potter, global vice president/chemicals at S&P Global, in a recent presentation. "Naphtha cracker margins in Europe and Asia will be below reinvestment levels in 2024 and 2025."Unlike Asia, Europe lacks strong economic growth, with most European economies on the brink of recession, resulting in weak demand for petrochemicals and polymers.The ExxonMobil and Sabic closures will result in a combined 955,000 metric tons per year of ethylene capacity being eliminated. According to Michael Liesfeldt, director/olefins and derivatives, Middle East and Africa at S&P Global Commodity Insights, the announced closures account for only 4% of the total available ethylene capacity in Western Europe. France and the Netherlands will see a combined 14% reduction of capacity, which should be enough to move cracker utilization from current "low" rates to the mid-80s in percentage terms, he said.To move Western Europe up to an average 90% cracker utilization rate, another 1 million metric tons per year (MMt/y) of ethylene capacity would need to exit the market as of 2026, Liesfeldt said.However, Europe’s capacity crisis should not be viewed in isolation, because China’s buildup, which is on course to continue for the rest of this decade, necessitates a global perspective, said Walt Hart, executive director/olefins, Americas at S&P Global Commodity Insights. "The existing overcapacity problem will be exacerbated by the addition of around 23 million metric tons of new ethylene capacity in mainland China by 2030, which will mainly be comprised of naphtha crackers," Hart said. "Thus, while the capacity rationalization announced in Europe is certainly helpful, Europe cannot solve the global problem. A more rapid return to strong global ethylene margins would require contributions to capacity rationalization from other regions, as well as some new project cancellations."The outlook for ethylene in Europe is bleak. "World demand for ethylene derivatives is increasing, with Western Europe’s share declining," said Liesfeldt. "The fact is that the already high living standards and low population growth in Europe will limit overall [demand] growth, and recycled materials use will increase over time." Europe’s share of global ethylene derivatives demand dropped from 16.5% in 2010, to 9.9% in 2023, according to S&P Global.Multinationals such as ExxonMobil and Sabic are "playing the long game, rebalancing global sales and operations planning," Liesfeldt said. ExxonMobil could ship polymer volumes from its larger cost-advantaged facilities in the US to protect market share in Europe, he said. Sabic, meanwhile, can optimize its regional footprint and utilize more cost-effective olefin units such as the company’s 865,000 metric tons per year cracker at Wilton, UK, once the unit restarts after an extensive upgrade to cut CO2 emissions.Ineos Group Ltd., meanwhile, is building the first new cracker in Europe for 25 years at Antwerp, with capacity for 1.45 MMt/y of ethylene, which will be the largest olefins unit in Europe. The project is currently stalled because of a campaign by environmentalists, but Ineos has not changed the plant’s announced completion date of 2026.Liesfeldt noted that in the whole of Europe there are 51 crackers in operation. The average naphtha cracker size in the region is 500,000 metric tons per year, he said."Many old crackers have a relatively low capacity," Liesfeldt said. "The world scale was different 10-20 years ago." Ethane cracker world scale today is up to 2 MMt/y in the US and Middle East, and naphtha crackers are larger than 1.2 MMt/y, he said.Apart from older crackers, the ethylene plants that are most likely to close in Europe are "the crackers that are not heavily integrated, small sized and requiring future high reinvestments to meet new standards," Liesfeldt said. These plants "will see ongoing scrutiny, especially with the limited demand growth," he said.Much of Europe’s olefins industry is in clusters and/or integrated with refineries. "The integrated sites and assets are connected with ‘hardware’ such as pipelines, rail, road, waterways and ‘software’ such as commercial agreements for raw materials and finished products, swaps between partners, shared energy and utility contracts," Liesfeldt said. "This is all aimed at bringing down the total cost of the cluster."Some crackers in Europe, such as Ineos’ plants at Grangemouth, UK, and Rafnes, Norway, have switched to consuming ethane imported from the US, which has put them at a cost advantage relative to Europe’s many naphtha crackers. Other European crackers can consume liquefied petroleum gas, which makes them more competitive than naphtha crackers. "Imported ethane is the best option," Liesfeldt said. "Naphtha has the highest cost. If you have flexible crackers, you can move to imported ethane or the next best available feed." This article first appeared in chemweek.com

WPC 2024: Dow CEO sees demand stabilization in early 2024, net-zero Alberta cracker construction imminent

Chemical demand is stabilizing in early 2024, Dow Inc. chairman and CEO Jim Fitterling said at the World Petrochemical Conference by SP Global in Houston. Construction of Dow’s net-zero Alberta cracker will begin soon, and the company hopes to pursue similar net-zero ethylene investment in the US. WPC took place from March 18-22 and LIVE is your all-access pass to the conference. Check back for more chemical insights and cutting-edge coverage.

WPC 2024: Alberta premier on role of petrochemicals in province

Alberta premier Danielle Smith highlights the critical role petrochemicals play in Alberta’s economy at the World Petrochemical Conference by SP Global in Houston. She highlighted the low-cost gas and feedstock advantage, available carbon capture infrastructure, and steps Alberta is taking to ensure hydrocarbons are upgraded to higher-value chemicals and derivatives in the province. WPC took place from March 18-22 and LIVE is your all-access pass to the conference. Check back for more chemical insights and cutting-edge coverage.

WPC 2024: Evonik deputy CEO highlights energy transition strategy

Evonik deputy CEO Harald Schwager said the company is seeing demand stabilize in its core markets at the World Petrochemical Conference by SP Global in Houston. Schwager also addressed the impact of energy transition on Evonik’s strategic direction, portfolio alignment with sustainability trends, and the need for Europe to accelerate renewable infrastructure investment to European competitiveness. WPC took place from March 18-22 and LIVE is your all-access pass to the conference. Check back for more chemical insights and cutting-edge coverage.

WPC 2024: OMV executive chairman on sustainability as a growth driver

OMV chairman and CEO Albert Stern discusses early indications of a stronger demand environment for petrochemicals at the World Petrochemical Conference by SP Global in Houston. Stern also highlighted the opportunity that decarbonization and sustainability bring and how OMV is turning it into a growth driver. WPC took place from March 18-22 and LIVE is your all-access pass to the conference. Check back for more chemical insights and cutting-edge coverage.

WPC: Carbon management now key factor in petchem investment

WPC: Challenging geopolitical trends heighten the year of elections

Consortium ditches plan for joint CO2-to-polyolefins plant in Austria

WPC 2024 - COP28 and Davos Retrospective

Take advantage of invaluable insights from our SP Global Commodity Insights experts, Mark Eramo and Atul Arya, as they unpack the key takeaways from #COP28 and #Davos2024! This video is a must-watch as it offers intriguing perspectives on all the pivotal themes we'll explore at the World Petrochemical Conference. Hear more from Mark and Atul at WPC2024, where they'll delve into crucial topics like Materials Transition.  Secure your spot and interact with experts in the industry

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