Global ethylene plant operating rate will drop below 90% in 2010
At the 12th “Chemical Weekly†China Chemical Industry Symposium in Shanghai, Simon Lam, CEO of Petrom Corp. (CSPC), highlighted key challenges and future trends in the global ethylene market. Despite strong demand in China, he warned that a surge in new ethylene cracker projects—both in China and the Middle East—will lead to overcapacity and lower operating rates worldwide. By 2010, global ethylene plant utilization is expected to drop by 5 percentage points, falling below 90%.
Lam noted that global ethylene demand is projected to grow at an average of 6% annually. By 2010, the world will add approximately 30 million tons per year of new capacity. In China, current demand stands at around 17 million tons yearly, but it is expected to rise by 50% in the coming years. Meanwhile, the Middle East plans to add between 16 million and 21 million tons of new ethylene capacity annually, while China will add 12 million tons. This rapid expansion of supply is outpacing demand growth, leading to increased pressure on profit margins for producers.
He also pointed out that the traditional ethylene industry cycle may be nearing its end, though the exact timing remains unclear. The duration of this cycle depends on how quickly new capacities come online and how fast demand grows. If production delays occur, the cycle could be extended, but this is only a temporary reprieve.
Although China is planning to build numerous new ethylene crackers, it will still rely heavily on imports. By 2010, about half of China’s ethylene needs will continue to be met through imports. However, domestic demand alone won’t be enough to absorb the massive new supply from both China and the Middle East, forcing Middle Eastern producers to look for markets in other regions.
As more new facilities come online, the petrochemical sector will become increasingly competitive. Smaller crackers are likely to be phased out, and companies must invest in more efficient and integrated production units. CSPC has already taken steps in this direction, launching an 800,000-ton-per-year ethylene cracker along with downstream facilities in Daya Bay, China. This facility can process both light and heavy naphtha, as well as condensate and light crude oil from Africa and the Middle East. CNOOC is also expanding its presence in the region, with a new refinery under construction that is expected to start operations in 2008. These developments signal a shift toward larger, more integrated, and globally connected production systems.
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