Ethylene is mainly used to make polyethylene (PE), which accounts for about 60% of world demand. Other major uses include the production of ethylene oxide (EO), ethylene glycol (EG), polyvinyl chloride (PVC) and polystyrene (PS).
In addition, ethylene is also used to produce other derivatives such as linear alpha olefins (LAO), detergent alcohols and plasticizer alcohols, vinyl acetate monomer (VAM), and various intermediates such as ethyl acetate (etac) and ethyl acrylate.
Ethylene supply tightened during the second half of the year noticeably in the months of September-October due to several key cracker turnarounds and reduced operating rates at key ethylene plants in southeast Asia amid a gas feedstock shortage.
On the demand front, the third quarter of the year coincided with the manufacturing peak season and boosted demand for ethylene.
In contrast, demand was largely sluggish in the first half of 2013, and the anticipated pick-up in demand after the Lunar New Year holidays in February did not materialise amid global economic concerns.
Cracker utilisation rates in Asia kicked off 2013 at reduced rates averaging around 80-90% capacity in Asia from a weak base in the fourth quarter of 2012 but have improved largely to 90% capacity and above by October.
Ethylene prices reached a seven-month high of $1,400-1,420/tonne CFR NE Asia during the month of October, bolstered by tight supply on the back of a heavy cracker turnaround season in Japan, South Korea and Taiwan in September-October.
This was in contrast to a weak performance in March-May 2013 when prices plunged to as low as under $1,200/tonne CFR NE Asia during this period partly because unplanned outages at derivative plants in the region had lengthened supply and led to more exports from South Korea and Japan, which exerted downward pressure on spot prices.
However, the ethylene market appears to have peaked in early November amid anticipation that the tight supply is expected to ease due to the restart of crackers from scheduled maintenance.
Ethylene is produced commercially by the steam cracking of a wide range of hydrocarbon feedstocks. In Asia, ethylene is obtained mainly from cracking naphtha, gasoil and condensates with the coproduction of propylene, C4 olefins and aromatics from pyrolysis gasoline (pygas).
In recent years, the spotlight has been on producing ethylene via the methanol-to-olefins (MTO) process, which converts methanol derived from crude oil and non-crude oil sources such as coal or natural gas to ethylene and propylene.
MTO also offers flexibility in the quantity of propylene and ethylene produced, so producers can adjust plant designs to most effectively address market demands.
There is considerable interest in using this technology in China with methanol produced via coal gasification. China is the world’s largest producer of coal, making it an attractive alternative feedstock.
Chinese producers Ningbo Heyuan and Wison (Nanjing) Clean Energy started up their MTO units this year. There are at least another 14 more MTO projects that are slated to come on stream in 2014-2015.
The key challenge for Asia remains how to stay competitive amid stiff competition from lower-cost producers in the Middle East and the US. The latter is set to be a game changer due to the shale gas revolution and at least seven new crackers are due to come on stream in 2016-2020.
As such, producers in Asia are expected to continue their consolidation drive to be more economical, to leverage on their proximity to regional markets, and to continue to pursue energy-efficient policies to drive down costs.
In Japan, Mitsubishi Chemical is on track to permanently shut its 392,000 tonne/year No 1 naphtha cracker in Kashima in April/May 2014.
The company – together with Asahi Kasei – is also studying consolidation of cracker operations in Mizushima into a single cracker. Sumitomo Chemical also plans to decommission its 415,000 tonne/year Chiba cracker by 2015.