SINGAPORE (ICIS)--Asia ethylene is expected to be more ample in 2019, on the back of fewer cracker turnarounds in Japan, regional capacity expansions and possible downstream output cuts.
The outlook for deep-sea supply is mixed, with European exports likely to be curtailed by a slew of cracker maintenance shutdowns, while shipments from the US may be lifted by a new export facility in the fourth quarter.
Spot ethylene prices in northeast Asia ended 2018 on a weak note.
Deals were at below $1,000/tonne CFR (vost & freight) NE (northeast) Asia in the fourth quarter, lower compared with prices in the low $1,200s/tonne to low $1,400s/tonne CFR NE Asia during January-September.
The market was undermined by ample supply from the Middle East and southeast Asia, owing to strong cracker run-rates, weak polyethylene (PE) sales and planned and unplanned downstream outages.
The abundant supply in the fourth quarter may continue in 2019.
Japan – the second largest exporter after South Korea -- shipped out 455,742 tonnes of ethylene during January-October of 2018, down 24.5% from the period a year earlier due to a heavy cracker turnaround schedule.
The country’s 2019 exports will likely recover to around 700,000 tonnes, similar to levels seen in 2017, in line with higher production.
Capacity losses from annual maintenance shutdowns are expected to fall by around 64% from 2018 to around 183,000 tonnes.
Producers in South Korea and Malaysia will also increase shipments to regional markets in 2019, amid a slew of capacity expansions.
Five projects with a combined capacity of 2.24m tonnes/year are coming on-stream between the third quarter of 2018 and mid-2019.
Up to 27-28% of that supply, or 610,000-630,000 tonnes/year, are potentially available for merchant sale – for companies that are not owned or affiliated with the producer - with suppliers targeting mainly the key China market.
South Korea’s Hanwha Total Petrochemical will become a net seller temporarily when its additional capacity is on-stream in mid-2019.
It will return to a net short position towards the end of the year once its new 400,000 tonne/year high density polyethylene (HDPE)/linear low density polyethylene (LLDPE) plant starts up.
The impact of the higher domestic ethylene supply will be moderated by a reduction in Yeochun NCC’s (YNCC) exports and capacity losses from multiple cracker turnarounds in the first half of 2019.
YNCC will allocate more ethylene to its own styrene monomer (SM) unit and downstream plants of its shareholder Hanwha Chemical, to support several debottlenecking projects.
In addition, four plants in South Korea will shut for maintenance in the first half of the year, with capacity losses of around 387,000 tonnes.
The Petronas-Saudi Aramco joint venture plant in Malaysia will help mitigate production losses from a series of cracker turnarounds in southeast Asia in the second half of 2019.
Major southeast Asian suppliers such as Petronas Chemicals Olefins, Chandra Asri and Shell will take their facilities down, contributing to scheduled capacity losses of around 522,000 tonnes, which are higher compared to 270,000 tonnes in 2018.
The demand outlook is mixed
Production activity in some downstream sectors in Asia may weaken, under pressure from rapid capacity expansions in the US and Asia as well as the ongoing US-China trade war.
PE supply glut could worsen if shipments from the US increase as producers there resolve their logistics issues progressively.
The US polymer capacity will continue to climb in 2019, with another 2.37m tonnes/year slated to come on-stream, adding to expansions totalling 4.115m tonnes/year completed in the country since 2017. Competition in the monoethylene (MEG) and styrene monomer (SM) markets is set to intensify.
Over 4m tonnes/year of additional MEG capacity is scheduled to be operational in China, Malaysia and the US between late 2018 and 2019.
Suppliers in the US, which will turn into a net exporter, are likely to go around to circumvent the tariff on their imports into China - the leading polyester market - through internal swaps with their facilities in other locations.
Chinese SM makers may see lower margins when Zhejiang Petrochemical enters the fray.
The company will have a massive 1.2m tonnes/year SM plant in 2019.
On a more upbeat note for suppliers, ethylene import demand in China will continue to draw support from downstream capacity expansions.
Four non-integrated plants that are scheduled to start up between the third quarter of 2018 and 2019 could boost consumption of ethylene by up to over 480,000 tonnes/year.
Some of the increases in import requirements in 2019 may be offset by new domestic supply from SP Chemicals’ cracker, China’s first project that uses a combination of ethane and propane feed, as well as Nanjing Chengzhi New Energy’s methanol-to-olefins (MTO) plant.
The plant is due to come on-stream in the second half of 2019, although some market players expect possible delays to 2020.
When operational, SP Chemicals, which currently relies on imports of ethylene for its vinyl chloride monomer (VCM) and styrene monomer (SM) plants, will turn into a net seller.
It currently requires up to around 320,000 tonnes/year of ethylene imports when its plants are operating fully.
Separately, Nanjing Chengzhi, which does not have any ethylene downstream facilities will have a second MTO unit with 240,000 tonnes/year of ethylene capacity.
Shipments to China have continued to grow strongly in 2018, even after the sterling 30% year-on-year increase in import volumes in 2017.
Imports in the first 10 months of the year totalled 2.09m tonnes, an increase of 17.9% over the same period a year ago.
By the end of December, imports are likely to cross above the 2.5m tonnes mark, which will represent a growth of more than 15% from the previous year’s 2.16m tonnes.
Indonesia’s import demand will likely increase from the second half of 2019 due to a structural tightening in the domestic balance.
The country’s sole domestic producer Chandra Asri plans to start up a 400,000 tonne/year PE unit in late 2019, after its cracker completes an expansion during a turnaround in the third quarter.
Its net ethylene surplus will shrink to 60,000 tonnes/year, from close to 420,000 tonnes/year currently.
West-east arbitrage outlook is mixed
US exports will increase towards the end of the year if Enterprise Products Partners and Navigator Holdings’ new export terminal with a capacity of 1m tonnes/year starts up in the fourth quarter of 2019.
The terminal, however, will not be able to operate at full capacity until its refrigerated storage facility is ready in 2020.
Shipments from Europe could be crimped by a heavy cracker turnaround schedule in spring of 2019.
The affected units include a cracker that belongs to Italy’s Versalis, which is a key exporter to Asia.
Asia ethylene projects
|Company||Location||Facility||C2 capacity (KTA)||Start-up schedule|
|S-Oil||Onsan, South Korea||Ethylene recovery unit||200||End Aug/early Sept 2018|
|Lotte Chemical||Yeosu, South Korea||Steam cracker||+200 to 1,200||Dec 2018|
|LG Chem||Daesan, South Korea||Steam cracker||+230 to 1,270||Apr 2019|
|Hanwha Total Petrochemical||Daesan, South Korea||Steam cracker||+310 to 1,400||May 2019|
|Pengerang Refining||Johor, Malaysia||Steam cracker||1,300||Late Q1/early Q2 2019|
|SP Chemicals||Jiangsu, China||Steam cracker||650||H2 2019-2020|
|Nanjing Chengzhi Clean Energy||Nanjing, China||MTO||240||Apr 2019|
|Total net C2 surplus*||1,180-1,200|
|Chandra Asri**||Cilegon, Indonesia||Steam cracker||+40 to 900||H2 2019|
|Zhejiang Petrochemical***||Zhejiang, China||Steam cracker||1,400||2019|
*Figure is based on Hanwha Total Petrochemical’s balance before it starts up its PE plant in end 2019
**Chandra’s ethylene balance will tighten when its PE plant starts up in end 2019
China downstream projects
|Anhui Haoyuan Chemical||Anhui||SM||260||Aug 2018||78|
|Jiangsu Jurong Chemical||Jiangsu||EO||200||Dec 2018-early 2019||160|
|CITIC Guoan Chemical||Shandong||SM||200||2019||60|
|Hebei Jinniu Chemical Industry||Hebei||VCM/PVC/EDC||400/400/300||2019||185|
South Korea downstream projects
|LG Chem||Daesan||Polyolefin elastomer||200||Nov 2018|
|YNCC||Yeosu||SM||+80 to 370||Mid-2019|
|Hanwha Chemical||Yeosu||VCM||+150 to 535||2019|
|Hanwha Chemical||Yeosu||LDPE, LLDPE||+50 to 732||Q1 2019|
|Hanwha Total Petrochemical||Daesan||HDPE/LLDPE||400||End 2019|
Focus article by Yeow Pei Lin