AMERICA LEADS THE EXPANSION OF ETHYLENE CAPACITY GLOBAL POLYOLEFIN IS NOW A EXCESS PROBLEM

Petral Consulting recently warned that the amount of polyethylene (PE) capacity building in the United States and the rest of the world will exceed demand growth, and it could take years for the market to balance supply and demand.In fact, three years ago international polymer consulting company President Bob bowman had similar warning, the shale gas revolution, and in other parts of the project will bring global 25 million tons/year of new ethylene production capacity, the polyolefin markets around the world in a "war".

Shale gas creates a boom in ethylene

Dan Lippe, owner of Petral Consulting, said the us alone would add a lot of new PE capacity.ICIS monitoring data show that in 2019 to the United States will 9 sets of new ethylene cracking unit, the new ethylene production capacity of 9.2 million tons/year, will also add revamping/expansion of existing ethylene plant ethylene production capacity of 1.1 million tons/year, both total accounted for 34% of the ethylene production capacity.Moreover, most of the new ethylene production capacity will be converted into PE resin.

By 2019, according to ICIS, the us will be adding 6.5 million tons of new PE capacity, or 40 percent of the country's PE capacity.In addition, the rest of the world is increasing its PE production capacity, and is equal to new U.S. PE capacity.'if these new PE capacity is gradually realized in 10 years, it won't be a problem,' he said.However, these new PE production capacity in relatively short period of production, the market must be difficult to digest.

Lippe said the two-year extension of the ethylene and PE was much more productive than any other two years in the last 40 years.The main reason is that the United States has rich raw materials, the low cost of ethane American petrochemical producers can rely on ethylene oxide production, and the rest of the world rely on naphtha as the raw material compared to the enterprise, the manufacturer has a significant cost advantage.With the support of ethane raw materials and the growing demand of PE, many petrochemical companies have participated in the construction of the polyethylene project.

The U.S. natural gas purification plant has some flexibility in meeting the demand for ethane materials for these new ethylene plants.Many natural gas plants do not usually extract all ethane from the natural gas stream, but instead use some ethane to use as fuel for natural gas.If the price of ethane is high enough, the gas plant extracts more ethane from the raw material, selling it to a petrochemical producer to crack the raw material for greater benefit.

Lippe believes that the gas treatment plants near the gulf coast will recycle as much ethane as possible to meet the needs of the forthcoming ethane cracking plant.He predicted that us petrochemical producers would continue to maintain cost advantage by the first half of 2018.

The advantages or disappearance of American ethane

But from the second half of 2018 to 2020, American companies will add a new batch of ethylene projects.The new wave of ethylene capacity building will further increase the demand for ethane.As a result, the gulf coast will need to receive ethane from its higher-cost basin gas plants.These gas plants are farther along the gulf coast, and higher transportation costs will make ethane more expensive.

Lippe believes that higher ethane in the second half of 2018 will increase the cost of ethylene production in the United States and erode PE profit margins.Most of the PE produced in the United States will export to foreign markets and compete with other new PE factories.

High-end resin capacity is also surging

The U.S. new ethylene plant will provide raw materials for higher-end PE devices, and many companies are hoping to achieve higher margins by producing high-end PE products.For example, a new device built by chevron phillips chemical company will produce new PE products.The new Hyperzone technology will be used in new PE resins in Basel.Similarly, exxonmobil's new plant location is also a production of high-grade PE resin.Dow dupont has been selling new PE resins in the market for packaging applications.

These high-end resins can help companies gain a competitive edge in an oversupplied market.Companies that have added PE capacity argue that consumers in emerging markets will continue to adopt middle-class buying habits, and that urbanisation will accelerate.Both trends will help to increase the demand for packaging plastics.Still, globally, there is indeed a lot of new capacity to be added in a short period of time.

Although dow dupont acknowledged in recent earnings PE resin imbalance of supply and demand situation, however, the company's expansion project can't midway stop and will continue to steadily, as far as possible to shorten the duration of the imbalance between supply and demand, reduce the influence of the imbalance between supply and demand.

Lippe said it could take at least five years for petrochemical producers to absorb the rapid increase in supply.He points out that these companies have two options, either to accept lower margins over the next three to five years, or to close older PE resins.If you choose the latter, these old PE production capacity is equal to 50% ~ 75% of the new PE capacity in the United States.

                                                                                                                                     By Feifei