Middle East, Chinese, petchem capacity starts to arrive

C2 Feb10.pngThe blog spent a fruitful afternoon last week, going through ICIS news reports of cracker start-ups in the Middle East and China. The chart above is the fruit of its labours, which shows that 4.8MT of ethylene capacity started up last year in the ME, and 2.1MT in China. Whilst latest estimates suggest that another 3.3MT will start up this year in the Middle East, and 3.95MT in China.

The problem, of course, is that these new capacities are starting up with demand much reduced versus the growth levels seen in the 2003-7 Boom period, when these plants were planned. And, of course, other crackers are also starting up in Asia and elsewhere. Thus global Operating Rates are likely to be c80% level this year, unless demand suddenly improves.

But not all regions will run at this average rate. The blog’s view is that both the ME and China will run at maximum rates – the ME due to its cost advantage with gas-based feedstocks, and China because of national energy policy. Thus NEA ex-China and SEA will find it very difficult to run at the global rate, as their exports to China are reduced.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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