12 March 2012 00:00 [Source: ICB]
Analysis by global advisers Booz & Company paints a rather depressing picture showing Europe moving further up the cost curve for ethylene production whilst the US sinks down towards the Middle East. Europe, it suggests, is already vying for bottom place with north Asian producers.
As North American gas supplies continue to grow sharply, a price ceiling of $6-7/million cubic feet will develop over the next decade, says Booz. Little wonder that US players and foreign investors such as Thailand's Indorama are scrambling to the new gold rush.
According to Booz, North American ethylene production will grow from 29m-30m tonnes in 2012 to 43m-45m tonnes over the next 10 years, based just on announced plans. A lot of US polyethylene (PE) will be heading to Europe, where crackers will run at reduced rates and then close, according to Booz. Operators there must continue to examine their assets and optimise where they do have the advantage: naphtha-based producers in Europe have a far wider portfolio of advanced propylene and C4 derivatives, as well as close proximity to what is still the world's largest regional market.
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