BLOG: Supermajors versus Deglobalisation scenarios: The impact on petrochemicals and recycling

John Richardson

08-Dec-2023

SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

HERE ARE TWO scenarios or roads down which the petrochemicals industry will travel over the next ten years, with arrival either at Supermajors or Deglobalisation –

Under Supermajors, the industry would be dominated by global oil and gas companies.

Under Deglobalisation, markets would become much more regional as local players avoided what could otherwise be a major wave of consolidation. This would be thanks to new trade barriers and other support from governments.

In the case of plastics recycling, there are concerns, rightly or wrongly, that under the Supermajors outcome, competitively priced virgin polymer imports could place further strain on recyclers.

Today’s post looks in detail at the impact already being felt in Australia because of the collapse of virgin polymer prices.

Is there a happy medium where we see a rapid growth in converting more oil into petrochemicals that fits with achieving recycling mandates?

A lot will hinge on the judgements of regulators.

In the EU, the region’s petrochemicals industry is likely to be hit by substantially higher carbon prices and a more ambitious wave of CO2-reduction targets.

The judgement of EU regulators will be critical here as well as pressure for consolidation builds on smaller, less efficient European petrochemical players.

This is due to the huge growth in highly competitive new capacities in the Middle East and North America. These new plants are said to have lower decarbonisation costs.

Would either Supermajors or Deglobalisation be best for reducing carbon, and as mentioned, improving plastics circularity?

Another two other factors that will shape outcomes are what’s best for local employment (it is said that one petrochemical job equals 12 downstream), and supply security in a very uncertain geopolitical world.

Many other less extreme outcomes are possible between Supermajors and Deglobalisation.

Scenarios will need to be frequently re-examined to assess what has become the more likely outcome, factoring in, for example, the pace of crude-oil-to-chemicals investments in Saudi Arabia and any new trade barriers.

Petrochemical companies, buyers, traders, distributors, tank terminal operators, engineering and procurement contractors and financial companies etc. will be affected in different ways.

Whatever the outcomes. I am convinced that the following events are inevitable.

China will be much more self-sufficient by 2030 in polyethylene (PE), polypropylene (PP),  paraxylene (PX) and  ethylene glycols (EF) than is commonly assumed. I believe China will become pretty much balanced in all these products.

Because of changes to China’s economy – and because of the global impact of ageing populations, sustainability and climate change – we have entered a period of significantly lower petrochemicals demand growth.

There can be no return to business as usual.

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.

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