30 April 2012 00:00 [Source: ICB]
Just because ethylene capacity increases, it doesn't mean that ethylene oxide (EO) capacity will rise with it. And pertinent to the surfactants market, you can count even less on additional supplies of purified EO.
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More purified EO is needed for the surfactants market
In the US, while the shale gas boom has led to a rash of announced ethylene investments, this has not been accompanied by any comparable level of EO, and especially purified EO projects.
Ethylene glycol draws the majority of EO production, as polyester fiber and PET bottles continue to drive growth, noted Doug Rightler, president of consultancy EO&D, at the conference.
That poses a challenge for surfactants producers that require purified EO.
And EO buyers should monitor China's development of coal-to-methanol-to-olefins plants, Righter pointed out. These olefins can then be used to make EG and EO. But if these projects do not go through, as there are significant technical challenges, China's EG will have to be supplied from conventional production. That would further tighten EO supply, driving prices even higher.
Producers also typically prefer to manufacture and sell EG over EO because EO's explosive properties make it difficult to transport, said Richtler.
Surfactants manufacturers need commitment - from ethylene and EO producers to make purified EO. That requires confidence in future demand growth.
One indication of such growth is that India-based conglomerate Reliance Industries announced that it is planning to enter the global surfactants market.
Reliance sees this as the missing link in its value chain from oil and gas, all the way down to the retail segment, said Harish Davey, president, strategy and business development, at the conference. Reliance plays on both ends, as well as in basic chemicals.
Davey projects the India surfactants market to grow from $2bn in 2010, to $6bn by 2020.
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