EPCA ’22: Europe highest cost chemicals producing region, shutdowns encourage imports – ICIS

BERLIN (ICIS)–Europe is now the highest cost region for producing many chemicals, an ICIS senior analyst said on Monday, as energy costs in the region have skyrocketed.

High costs are helping drive operating rates down and making imports more attractive, added James Wilson at a seminar held before the official opening of this year’s European Petrochemical Association (EPCA) annual meeting.

Europe’s steam crackers have moved from around the middle of the global ethylene cost curve, which tracks the variable cost of production of ethylene, plant by plant, worldwide, to the far right, highest cost end, Wilson showed.

Plants producing more natural gas-intensive chemicals are affected even more by Europe’s energy crisis.

Gas prices may have doubled in certain parts of the world but, in Europe, they have risen much higher because of supply restrictions due to Russia’s war in Ukraine, and deep market uncertainty, according to ICIS European spot gas markets editor Alice Casagni.

The future is uncertain with year ahead gas prices remaining high.

Producing chemicals such as methanol, ammonia, and isocyanates is clearly impacted by high natural gas costs but, for chemicals production units in general, including Europe’s steam crackers, operations are under pressure from the higher cost of feedstocks, electricity, and of raising steam.

Europe has the most expensive cost base now for producing polyvinyl chloride (PVC), styrene, monoethylene glycol (MEG), and methanol, for example, said Wilson.

Click on image to enlarge
Green bars are individual plants in Europe. Highest costs are to the right, lowest to the left

 

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The chemical industry is further exposed by expected gas rationing by European nations in the coming winter, which could impact chemicals production, alongside production in other industrial sectors.

Producers have the option to reduce operating rates but the technical minimum is around 60%, Wilson said, and that would not result in a linear reduction in energy requirements.

“While there are some ways for producers to reduce their natural gas usage, the impact of these steps is expected to be limited,” he added.

“Reductions in run rates of other industrial sectors will impact on chemicals demand,” said Wilson.

“Weakening global demand, combined with recent capacity investments, primarily in the US and Asia, may mean that European producers will face competition from imported material.”

The EPCA annual meeting runs on 4-6 October in Berlin.

Front page picture source: Jeppe Gustafsson/Shutterstock