GPCA '10: Global 2010 ethylene production to reach 119m tonnes

07 December 2010 15:10  [Source: ICIS news]

DUBAI (ICIS)--Global production of ethylene is expected to rise to 119m tonnes this year because of high demand growth and inventory restocking activities, an industry analyst said on Tuesday.

“2010 could be a record year for incremental demand growth,” said Tony Potter, CMAI's managing director for the Middle East and India, at the 2010 GPCA Chemicals Market Outlook Seminar.

“However, some of this is restocking of the inventory pipeline, an event that will not repeat year after year,” Potter said.

The full impact of the recent inventory build worldwide - especially in the Middle East - would be felt once it ended and as project delays and feedstock issues were resolved, he said.

This would challenge the margins of naphtha-based producers during 2011 and 2012, Potter added.

Olefin producers in the Middle East started up 12 new cracker complexes during the 2008-2010 period, amounting to 13m tonnes of additional ethylene capacity, according to Potter.

“In addition with a new wave of new capacity in Asia, partially in China, the world was expected to be well over-supplied with olefin derivatives by now, with naphtha cracking margins in particular under severe pressure,” he said.

However, delays to derivative units and some interruptions to feedstock supplies have muted the impact of the new capacity on world markets, Potter added.

Looking ahead, product prices of olefins derivatives would still be driven by how producers are covering the costs of cracking their naphtha feedstock, according to the analyst.

Some 50% of ethylene produced globally still uses naphtha as feedstock despite increased availability of ethane and natural gas, Potter said.

Ethane constitutes 33% of the overall worldwide feedstock used in the production of ethylene, while propane makes up 3%, he added.

On the demand side, 61% of ethylene produced globally now goes into the making of polyethylene (PE), with 13% used to make ethylene oxide (EO), Potter said.

Ethylene demand growth was expected to be in excess of 4.5% until 2015, led by demand for derivatives such as PE, paraxylene (PX) and EO, he added.

The outlook seminar is part of the fifth annual Gulf Petrochemical and Chemical Association (GPCA) Forum in Dubai, which runs from 7-9 December.

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By: Nurluqman Suratman

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