Chemical profile: ethylene

European ethylene market summary

09 June 2008 00:00 [Source: ICB]

Correction: in the Chemical profile entitled "ethylene", please read, in the 15th paragraph, "Singapore-based Eurochem's olefins complex in Nigeria," instead of "Russia-based EuroChem's olefins complex in Nigeria." A corrected story follows:

USES

Ethylene is primarily used to make polyethylene (PE), which accounts for 60% of global demand. Other major uses are ethylene oxide (EO), ethylene glycol (EG), polyvinyl chloride (PVC), and polystyrene (PS). Smaller uses include alpha olefins, vinyl acetate monomer (VAM), and various intermediates such as ethyl acetate (etac) and ethyl acrylate.

SUPPLY/DEMAND

The European market is said to be finely balanced, with good demand across all major sectors. But the prospect of weaker demand because of overwhelming oil and feedstock costs is a concern. This was reinforced by US-headquartered Dow Europe's closure of a low density polyethylene (LDPE) line in Spain for a week in May and a 20% cut in high density polyethylene (HDPE) output in June.

Cracker margins remain poor and, although no significant cuts in output have been made, plants are not producing incremental volumes.

The Aethylen Rohrieitungsgesellschaft (ARG) pipeline is expected to be back in full operation by the end of June, after a fire in March. The outage has caused some regional imbalances and has isolated sites in Cologne and Gelsenkirchen, Germany.

The UK's INEOS has bought Borealis of Austria's petrochemicals and Norway-based Norsk Hydro's Hydro Polymers businesses, gaining full ownership of the Noretyl ethylene cracker at Rafnes, Norway.

PRICES

The first European bi-monthly contract for JuneJuly settled at €1,105/tonne, up €75/tonne on AprilMay, driven by record naphtha highs. Quarter two (Q2) contracts are €1,038/tonne, a rise of €15/tonne on Q1. Spot activity is thin, with prices at €1,050-1,110/tonne FD NWE.

Producers say prices have been consistently trailing feedstock costs, as energy and naphtha prices continue to hit record highs. Margins hit a trough in December 2007 and remain weak. Contract margins rallied slightly in late May, up around €40/tonne, but they were still down by 40% on April.

Support for the bi-monthly contract has dwindled, with three participants withdrawing in 2007, leaving just one seller and a handful of customers.

A monthly contract system was established in 2005, but this, too, found little support and is no longer publicly reported.

TECHNOLOGY

Ethylene is produced commercially by the steam cracking of hydrocarbons. In Europe and Asia, it is obtained mainly from cracking naphtha, gasoil and condensates with co-products propylene, C4 olefins and aromatics. The cracking of ethane and propane, mostly in the Middle East, US and Canada, only produces ethylene and propylene, making plants cheaper to build and easier to operate.

Development efforts are concentrated on improving plant performance through process optimization, computer control and furnace design. Designers are exploring a switch from metal to ceramic-based furnaces that can offer much higher conversion rates and efficiency.

SK and Korea Research Institute of Chemical Technology, both South Korean, have developed advanced catalytic olefin (ACO) technology that extracts ethylene, propylene and other olefin products from naphtha at a reduced temperature of 700e_SDgrC (1,292e_SDgrF), lowering energy needs by 20% and initial investments costs by 30%. ACO technology will be used in SK's new plant in Ulsan which is due on stream in 2009.

Olefin cracking and inter-conversion processes are being developed to boost light olefins output. Typically, they convert C4C8 olefins and light pyrolysis gasoline (pygas) into ethylene and propylene. Newer catalytic processes are being developed to better control the cracking process or permit the dehydrogenation of ethane.

Small quantities of dilute ethylene can be obtained from refinery streams. In South Africa, ethylene is produced by the Fisher-Tropsch process in coal gasification.

Processes are also available that use lower alcohols as feedstocks. Norsk Hydro and UOP, of the US, have developed methanol-to-olefins (MTO) technology that converts methanol to ethylene and propylene. Singapore-based Eurochem's olefins complex in Nigeria will be the first commercial installation of MTO and startup is due in 2012. More MTO projects are under discussion in Russia, China, the Middle East, and North Africa.

Much research is being done into directly converting methane to ethylene, but the low yield of ethylene and the high yield of unwanted carbon oxide by-products are proving to be a problem.

OUTLOOK

The olefins sector is heading for a trough in 20092011, as a slug of capacity starts up, pressuring prices and margins, and pushing utilization rates down to below 90%.

In the Middle East, an extra 9m tonnes/year will start up in the next 12 months, equivalent to nearly two years of global demand. These include two crackers in Iran, five in Saudi Arabia, one in Kuwait and one in Qatar. The region's share of global capacity could reach 18.2% by 2010, up from 11.5% in 2007. Much of the new capacity will flow to Asia, but Europe is also a big export target.

In Europe, any investment will be confined to debottlenecks, although sources say the potential is limited, as most crackers have hit optimum capability. Plans by Saudi Arabia's SABIC and INEOS to build crackers in the Netherlands and Germany, respectively, have been shelved due to spiraling capital costs.

In Eastern Europe, cracker complexes are proposed at Nizhnekamsk, in Russia, and in Uzbekistan and Kazakhstan.

EUROPEAN ETHYLENE CAPACITY,'000 TONNES/YEAR

Company	Location	Capacity
Aktau Plastics Plant	Aktau,Kazakhstan	100
AngarskPetrochemical	Angarsk,Russia	300
AP Feyzin	Feyzin, France	250
Arpechim	Pitesti, Romania	200
BASF	Antwerp, Belgium	800
	Ludwigshafen, Germany	630
Borealis	Porvoo, Finland	380
	Stenungsund, Sweden	625
BP Refining & Petrochemicals	Gelsenkirchen, Germany	1065
Copenor	Dunkirk, France	380
Dioki	Zitnjak, Croatia	90
Dow Chemical	Bohlen, Germany	510
	Tarragona, Spain	735
	Terneuzen,Netherlands	1820
Exxon Chemical	Fawley, UK	125
ExxonMobil	Mossmorran, UK	830
Fina AntwerpOlefins	Antwerp,Belgium	1460
	Notre-Dame de Gravenchon, France	425
HIP-Petrohemija	Pancevo, Serbia	200
INEOS Olefins	Cologne,Germany	1110
	Grangemouth, UK	1020
	Rafnes, Norway	550
Karpatneftekhim	Kalush, Ukraine	260
KazanorgsintezJSC	Kazan, Russia	420
Lonza	Visp, Switzerland	35
Lukoil Neftochim	Burgas, Bulgaria	150
LyondellBasell Industries	Munchmunster, Germany	320
	Wesseling,Germany	1050
Naphtachimie	Lavera, France	775
Neftechimia	Novokuibyshevsk, Russia	180
Nizhnekamskneftekhim	Nizhnekamsk, Russia	650
OMV	Burghausen,Germany	450
	Schwechat,Austria	500
Petkim	Aliaga, Turkey	520
PKN Orlen	Plock, Poland	700
Polimeri Europa	Brindisi, Italy	440
	Gela, Italy	250
	Porto Marghera, Italy	490
	Priolo, Italy	745
Polymir JSC	Novopolotsk, Belarus	120
Repsol Polimeros	Sines, Portugal	415
Repsol YPF	Puertollano, Spain	280
	Tarragona, Spain	660
Rompetrol	Navodari,Romania	200
SABIC Europe	Geleen,Netherlands	1250
SABIC UKPetrochemicals	Wilton, UK	865
Salavatnefteorgsintez	Salavat, Russia	300
Shell & DEA Oil	Heide, Germany	110
	Wesseling,Germany	500
Shell	Moerdijk,Netherlands	910
Sibur-Khimprom	Perm, Russia	60
Sibur-Neftekhim	Dzerzhinsk, Russia	300
Sintezkauchuk	Sumgait,Azerbaijan	370
Slovnaft	Bratislava,Slovakia	210
Stavrolen	Budyonnovsk, Russia	350
Societe duCraqueur de l'Aubette	Berre, France	530
Syndial	Porto Torres, Italy	250
Tomskneftekhim	Tomsk, Russia	300
TotalPetrochemicals	Carling,France	620
	Gonfreville, France	500
TVK	Tiszaujvaros, Hungary	620
Ufaorgsintez	Ufa, Russia	235
Unipetrol	Litvinov,Czech Republic	560
Uzbekneftegas	Shurtan,Uzbekistan	140

Source: ICIS

Profile last published July 11, 2005

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