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Chemicals and the Economy

EU ethylene output highlights recession risk

Latest data from the IMF shows that the EU remains the world’s largest economic unit. Its GDP in 2010 was $16.2tn, 26% of the global economy. The USA was next with $14.5tn, and China 3rd with GDP of $5.9tn. So what happens in Europe matters greatly to the global economy. Equally, petchems are one of […]

Supply shortages drive olefin market profitability

The above chart would have seemed unbelievable at any time in the past 30 years. It shows the performance of propylene and butadiene relative to ethylene. Not because it shows butadiene prices racing ahead relative to ethylene (green line). This happens routinely during a downturn, as tyre demand is more robust than for polymers. If […]

Sinopec adds capacity as China’s ethylene growth stalls

Sinopec is China’s leading petchem producer. Its H1 results, out this week, confirm the blog’s concern that China’s growth surge has stalled. The chart shows Sinopec’s view of domestic demand growth for ethylene (blue line). After falling to zero in 2008 as the Great Recession began, growth rebounded to ~10% in 2009-10. But in H1 […]

Goldman halves global ethylene growth estimate

Goldman Sachs today halved its estimate for global ethylene growth to ~2.5%, and slashed its earnings estimates for some major US companies. Analyst Robert Koort warns: “Our outlook for earnings growth has decelerated substantially in recent weeks … Our economists now expect US GDP to grow only 1.7% in 2011 and 2.1% in 2012 vs. […]

European cracker margins at ‘top of cycle levels’

European cracker margins are currently “at top of cycle levels” according to INEOS last week. But as the above chart shows (based on APPE data), they remain supported by supply issues rather than demand. Operating rates actually slipped to 81% in H1, a figure more normally associated with a downturn. Detailed output figures for Q2 […]

Petchem markets become more complex

Our annual Asian conference in Singapore (co-organised as always with ICIS) was very interesting this week. We had some fascinating presentations from major companies including Reliance and Thai Oil, and China insights from CICCC and Chemease. Shell’s GM for strategy, Alexander Farina, discussed changes in cost competitiveness between benzene (grey column) and propylene (red) over […]

Europe’s supply-led ethylene market continues

Q1 saw near record margins for European petchem producers. And there was also a scramble for product, as buyers rushed to secure product ahead of feedstock price-related increases. But this remained a supply-led market. As the chart above shows, based on APPE data, Q1 production (red triangle) was just 5.1 million tonnes. It was slightly […]

US crackers feast on ethane feeds

There has been a dramatic shift in cracker feedstocks in the USA over the past 2 years, as crude oil prices have risen. Many US producers have been able to switch to ethane feed, and as a result have become some of the lowest-cost ethylene producers in the world. As the chart* shows: • In […]

Ethylene derivative imports threaten European markets

The chart above is a flashing amber light for European cracker operators. Based on ICIS Pricing data, it shows the delta between (a) European and US ethylene contract prices (blue line), and (b) Europe and the North East Asian spot price (red line). Usually, these deltas range between -$50/t and $100/t. H2 2008 was clearly […]

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