Ethylene is the raw material used in the manufacture of polymers such as polyethylene (PE), polyethylene terephthalate (PET), polyvinyl chloride (PVC) and polystyrene (PS) 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, 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, acrylonitrile-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 acetateand 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.
According to US-based SRI Consulting, global production and consumption of ethylene in 2009 were both approximately 112m tonnes. Global capacity utilisation was 85.3% in 2009, down from 87% in 2008. Ethylene consumption is estimated to have increased by 1.3% in 2009; it is forecast to grow an average 4.1%/year up to 2014, slowing to 3.4%/year from 2014 to 2019.
Middle East, China and the US
According to ICB, between 2010 and 2016, the Middle East and China will account for 24.9m tonne/year of new ethylene capacity out of a total 30.5m tonne/year. As a result, over 80% of the new ethylene production start ups will be in the Middle East and China.
In China, examples of projects include Fushun Petrochemical’s 800,000 tonne/year ethylene plant for start-up in 2012, and Kuwait Petroleum/Sinopec’s 1m tonne/year ethylene plant expected to start up in 2015.
Saudi Arabia has three cracker projects in the pipeline – Saudi Polymers’ 1.2m tonne/year ethylene project with start up due in Q4 2011, a 30% expansion by PetroRabigh and the delayed Dow Chemical and Saudi Aramco 1.2m tonne/year ethylene project, which originally had a start up date of 2015. With supplies of ethane for new crackers expected to be limited, new projects such as the Dow/Saudi Aramco cracker are likely to be based on other feedstocks such as naphtha.
In Abu Dhabi, the Borouge III ethane cracker which will produce 1.5m tonne/year of ethylene is expected to start up 2014.
Other ethylene projects in the pipeline include Braskem and Grupo Idesa's $2.5bn 1m tonne/year ethylene XXI project in Mexico, which is expected to start up in 2015.
Looking ahead, the US could capitalise on the potential offered by shale gas, which could make cracker economics in the US look increasingly attractive and provide competitive feedstocks for later expansions.
Updated: December 2010
Sources: Ethylene abstract, SRI Consulting January 2010; plants and projects; Projects: Middle East chemical projects threatened by ethane shortages, ICIS news, 30 August 2010, Global Hubs emerge, ICB, November 2010; Glut puts crackers under pressure, ICB, November 2010; Borouge company website.
Ethylene Margin Reports
ICIS pricing’s weekly ethylene margin reports (Europe, Asia and US) are designed to complement ICIS's highly regarded pricing data. They assess producer cash costs and cash margins for ethylene by modelling raw material and key variable manufacturing costs, co-product credits and product yields across the business from feedstock naphtha, ethane or liquefied petroleum gas.
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Combining ICIS pricing’s benchmark price assessments with feedstock yield models from Linde Engineering the reports provide a clear indication of the direction of business cash costs and cash margins, forming a basis for informed market positioning by sellers, buyers and traders.
Find out more by visiting www.icis.com/margins