DOLAN: China will account for 25% of world demand.

the growing amount of surplus ethylene in the Mideast, he says.

In Asia, China’s aim to be self-sufficient in petchems will be the driving force behind capacity expansions, analysts say. Chinese demand growth has far surpassed the rest of the world. The country’s demand for ethylene has grown more than 11% during the past 10 years, compared with 1.8% for Western Europe and 1.1% for North America, CMAI says (chart, top).

China will add more than 9 million m.t./ year of ethylene capacity between 2009- 12, reaching about 19. 7 million m.t./year by 2012, SRIC says.

“We expect Asia will account for over 60% of the world’s petrochemical demand growth, from 2005 to 2015, with China alone accounting for over 25% of world demand,” says Mike Dolan, senior v.p. at ExxonMobil. The company will “grow where demand growth is the stron-gest,” Dolan says. Fujian Refining & Petrochemical—ExxonMobil’s joint venture with Sinopec, Fujian Province, and Saudi Aramco—is building an integrated refinery and petchem complex at Fujian, China that is on schedule for start up later this year. The project will include an 800,000-m.t./year ethylene plant and several downstream units. ExxonMobil is building a second ethylene cracker at Jurong Island, Singapore, which will include polyethylene (PE), PP, specialty elastomers, benzene, and oxo-alcohol production. The company expects to start up the plant in 2011 (CW, Jan. 19, p. 37).

China’s operating rates will “remain high during 2009 to 2011, then decline in 2014 to 2015, according to the startup of new cracker projects there,” Gartner says. “But operating rates could improve if certain cracker projects in China are delayed,” he says.

Not all projects in China are moving forward, however. Jurong Aromatics Corp.’s (JAC; Singapore) previously announced $2-billion-plus aromatics project in

Singapore has been delayed. The project, originally scheduled for completion in 2011, will not be onstream until late 2012 or early 2013, JAC says. The complex will produce 800,000 m.t./year of para-xylene; 200,000 m.t./year of ortho-xylene; and 450,000 m.t./year of benzene. It will also produce 2. 5 million m.t./year of fuels. (CW, Feb. 2/9, p. 17).

PetroChina’s 1.2-million m.t./year ethylene unit and 100,000-bbls/day refinery at Dushanzi, China is expected to start up later this year, instead of 2008 as originally planned.

There are no new additions planned for Europe and North America, where ethylene plants are aging and require more maintenance, analysts say. These plants also lack the capacity to produce as much

 

ETHYLENE DEMAND OUTLOOK*

(in per cent)

12%

10

8

6

4

2

0

China Western North Europe America

*10-year average demand growth by region.

Source: CMAI (Houston).

ADDING ON*

Other GCC
countries 14%

Iran 13%

China and the Far East

Saudi

49% Arabia 24%

 

as the new world-scale plants under con-

struction. The average age of U.S. ethylene plants will be 33 years in 2010-2011, and in Western Europe, 36 years, HSBC says. Facilities more than 40 years old have average capacities of about 250,000 m.t./ year, but world-scale plants can produce in excess of 1 million m.t./year, HSBC adds.

“If keeping plants going is more expensive than it was in previous cycles, the cost of closure is lower,” Ahmed says.

*Estimated ethylene capacity additions by region for 2008-13. Source: CMAI (Houston).

Producers were prevented from passing through rising feedstock costs last year as margins eroded and inventories grew. Average ethylene margins finally turned positive last month, after staying negative since December 2008. Ethylene margins are expected to decline this year because of lower utilization rates, analysts say. “The industry is not making much money on a cash basis,” Borruso says.

North American producers should continue to be competitive against naphtha crackers, however, as long as crude oil prices are high and natural gas prices remain relatively low. A plentiful supply of natural gas liquids and liquefied petroleum gas, along with a favorable crude-to-gas ratio, has kept North America competitive on feedstock costs, Eramo says.

Exports from North America will continue to be strong this year, softening the impact of weaker demand. Producers are expected to maintain a positive net export position, but will most likely cede some market share to the Mideast, Eramo says. “Where the opportunity exists, North America will continue to move product in the export market—giving way to the Middle East as it needs to—but being able to compete with other countries in Asia in exports,” he says. Crackers that rely on naphtha or heavier feedstocks, many of which are in Asia, may face the most difficulties and may lose their competitiveness if they cannot offset high naphtha feedstock costs, he adds.

Meanwhile, the weak economic outlook has since the fourth quarter prompted a succession of North American olefins producers to idle production and one to permanently shutdown a plant. Koch Industries’ Flint Hills Resources permanently closed its 348,000-m.t./year olefins unit at Odessa, TX, shifting production to other plants. LyondellBasell idled its Equistar crackers at La Porte and Chocolate Bayou, TX. Chevron Phillips Chemical shuttered its Sweeny cracker at Old Ocean, TX, and Westlake Chemical idled an ethylene unit at Lake Charles, LA.

“The shutdowns will help a bit with near-term supply/demand, but our overall view is that, until GDP gets back to some sort of positive number, you’re not going to see overall balancing of supply and demand,” Wojnar says. “Clearly these are shutdowns that weren’t anticipated a year ago.”

About 18%, or 1. 2 billion lbs/year, of