Ethylene is the raw material used in the manufacture of polymers such as polyethylene (PE), polyester, polyvinyl chloride (PVC) and polystyrene as well as fibres and other organic chemicals. These products are used in a wide variety of industrial and consumer markets such as the packaging, transportation, electrical/electronic, textile and construction industries as well as consumer chemicals, coatings and adhesives. 
The largest outlet, accounting for 60% of ethylene demand globally, is polyethylene. Low density polyethylene (LDPE) and linear low density polyethylene (LLDPE) mainly go into film applications such as food and non-food packaging, shrink and stretch film, and non-packaging uses. High density polyethylene (HDPE) is used primarily in blow moulding and injection moulding applications such as containers, drums, household goods, caps and pallets. HDPE can also be extruded into pipes for water, gas and irrigation, and film for refuse sacks, carrier bags and industrial lining.
The next largest consumer of ethylene is ethylene oxide (EO) which is primarily used to make ethylene glycol. Most monoethylene glycol (MEG) is used to make polyester fibres for textile applications, polyethylene terephthalate (PET) resins for bottles and polyester film. MEG is also used in antifreeze applications. Other EO derivatives include ethyoxylates (for use in shampoo, kitchen cleaners, etc), glycol ethers (solvents, fuels, etc) and ethanolamines (surfactants, personal care products, etc).
Ethylene dichloride (EDC) is made by the chlorination of ethylene and can then be cracked to make vinyl chloride monomer (VCM). Nearly all VCM is used to make polyvinyl chloride which has its main applications in the construction industry.
Ethylene can be reacted with benzene to make ethylbenzene which is further processed into styrene. The main outlets for styrene are polymers and synthetic rubbers such as polystyrene (PS), acylonitrile-butadiene-styrene (ABS) and styrene butadiene rubber (SBR).
Other ethylene derivatives include alpha olefins which are used in LLDPE production, detergent alcohols and plasticizer alcohols; vinyl acetate monomer (VAM) which is used in adhesives, paints, paper coatings and barrier resins; and industrial ethanol which is used as a solvent or in the manufacture of chemical intermediates such as ethyl acetate and ethyl acrylate.
Ethylene is one of the largest-volume petrochemicals. With a diverse range of end-uses, demand is sensitive to both economic and energy cycles. It is often seen as a barometer to the performance of the petrochemical industry as whole.
Ethylene markets collapse
Up until 2008, global demand for ethylene had been growing at a reasonable average rate of 4-4.5%/year. Much of the growth has been driven by Asia and China in particular while the markets of Western Europe, North America and Japan have become mature.
Global demand for ethylene increased from an estimated 90m tonnes in 2000 to 115m tonnes in 2007, according to US based consultants CMAI. Consumption of ethylene into polyethylene and ethylene oxide has fuelled this growth while the ethylene dichloride/vinyls chain has recorded the slowest growth.
However, in the second half of 2008, ethylene markets saw a dramatic fall in demand as consumer confidence collapsed due to the economic crisis. The decline was exacerbated by falling feedstock costs and extensive destocking throughout the product chains. In addition, the hurricanes on the US Gulf Coast force unplanned shutdowns and restricted supply in August and September. The unprecedented downturn left the petrochemical industry shell-shocked.
CMAI estimates that demand fell by nearly 4m tonnes or 3% in 2008. It is forecasting that total ethylene consumption will return to 115m tonnes by 2010 resulting in demand growth for the 2008-2010 period being essentially zero.
However, considerable new ethylene capacity is planned with CMAI estimating that global capacity increases from 125m tonnes/year in 2007 to 148m tonnes/year by 2013. The majority of this new capacity will be located in the Middle East with its low feedstock costs and Asia where 28m tonnes/year capacity is expected to be added by 2013.
As a result of this overcapacity, CMAI expects that 7.5m tonnes/year of old capacity will be shut in North America and Western Europe. The rest of the world remains essentially unchanged as projects in the planning stage are assumed to be on-hold.
World capacity utilization rates will enter an extended trough period of below 90% for the next five years reaching the low 80s by 2010. Historically, when utilization rates are 90% and above, the industry enters a period of good profitability.
The low cost position of the Middle East producers will enable them to dominate global trade in ethylene derivatives. CMAI estimates that ethylene equivalent net exports from Kuwait, Saudi Arabia and Qatar will increase from 8m tonnes in 2008 to 28m tonnes in 2013. This increase in Middle East market share will come at the expense of producers in Asia and North America.
Updated: March 2009. Sources: CMAI 2009 World Petrochemical Conference, 25-26 March 2009, Houston, Texas.
Webinar - Understanding Ethylene margins
To understand the margin and cost curve analysis behind the Asian ethylene market and the methodology of our data collection, click on the link to view and listen to the archived version of the presentation.
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Ethylene
Process Technologies
Ethylene is produced commercially by the steam cracking of a wide range of hydrocarbon feedstocks. In Europe and Asia, ethylene is obtained mainly from cracking naphtha, gasoil and condensates with the coproduction of propylene, C4 olefins and aromatics (pyrolysis gasoline). The cracking of ethane and propane, primarily carried out in the US, Canada and the Middle East, has the advantage that it only produces ethylene and propylene, making the plants cheaper to construct and less complicated to operate.
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