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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