BLOG: A personal view of the new petrochemicals world

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: Here is a personal view of where the petrochemicals world is heading with the conclusions or scenarios from today’s post detailed below (the debate is the thing as this is how we move forward together):

• The US chemicals industry (with benefits trickling down to Canada) continues to thrive thanks to the Inflation Reduction Act, tariffs and feedstock advantages. Local demand growth could surprise on the upside as local investments, especially in greener petrochemicals production, continue. Dow Chemical is, for example, pressing-ahead with its two-phase plans for developing its site at Fort Saskatchewan in Canada, involving lower-carbon capacity additions. It is also talking about building a lower-carbon cracker in the US Gulf later-on which would be “scrap and build” – shutting down an older higher-carbon cracker complex.
• Europe sees a new industrial master plan. It won’t be perfect, there will be lots of trial and error and the problems will remain of coordinating government policies across the 27 EU members, enforcing EU-level policies that are only directives rather than regulations and the complexity of policies (the EU Green Deal is some 40,000 pages long). But Europe moves towards unified electricity, plastic-waste and bio-feedstock markets that the Antwerp Declaration called for. Some capacities are rationalized. A combination of these shutdowns, more protection and more EU-wide coordinated support for green incentives return the industry to good profitability. Crucially as renewable electricity capacity increases, European energy and thus electricity costs decline.
• China’s chemicals demand grows at 1-3% per year, down from long-term historic growth rates of around 10% or more. This places major pressure on the big petrochemical exporters to China – South Korea, Singapore, Taiwan, the Middle East and on the US in these products – PE, PVC and MEG.
• Weaker-than-forecast Chinese demand growth combines with increased Chinese self-sufficiency. This reduces the size of import markets.
• As regards self-sufficiency, China pushes its operating rates higher in order to minimize imports in response to supply-chain insecurities arising from geopolitical tensions.
• But China’s petrochemicals exports struggle because of the increase in trade measures. China is a well-established major exporter in PVC, PTA, polyester fibres and PET bottle and fibre grades. More recently it became a major exporter in PP. Trade measures against China provide opportunities for other exporters.
• As petrochemicals markets become more regional, some of the big new export-focused petrochemicals projects come into question.

Editor’s note: This blog post is an opinion piece. The views expressed are those of the author, and do not necessarily represent those of ICIS.