BLOG: Why HDPE and other petchem run rates could remain at record lows until 2030

John Richardson


SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson: I used to say to clients, when presenting charts such as the main chart in today’s blog, “This is very unlikely to happen”.

I would say, for example, that there was no real chance that global high-density polyethylene (HDPE) operating rates would average 76% between 2023 and 2030 compared with 88% in 2000-2022.

My message was that project cancellations and strong demand growth would quickly bring markets back into balance.

Now I am not so sure because of the impact on demand the end of the China property bubble, its ageing population, ageing populations elsewhere, sustainability and the effects of climate change.

China could become almost completely self-sufficient in all three grades of PE by 2030.

There are rumours of many crude-oil-to-chemicals (COTC) investments in the Middle East that have yet to be officially announced. China’s push to balanced positions in the above products is expected to receive big support from COTC projects.

There’s also a big wave of new ethane crackers being planned in the Middle East and North America.

This business could end up being largely dominated by oil and gas majors integrated downstream into petrochemicals.

Even in a world of persistently very low operating rates, the Supermajors may continue to build new plants.

This is because the Supermajors would have excellent cost-per-tonne economics – and they may need to maintain oil production as electrification of transport gathers pace.

There is a scenario this leads to a major wave of capacity closures in Europe, Southeast Asian and Northeast Asia that return operating rates to normal.

Instead, though, what about jobs? In my 26 November post, I said that every one job lost through a refinery or petrochemical plant closure equalled six jobs lost downstream. “More like 12,” I was told by a contact.

Even if petrochemical plants on a standalone basis continue to lose money, we might see government intervention to maintain employment.

Refineries may need to continue to run for security of local fuels supply in a very uncertain geopolitical world.

In countries such as South Korea and Thailand, petrochemical companies are important for broader economic growth.

Another argument supporting long-term low operating rates is the scale of the shutdowns required to bring markets back into balance.

Sticking to HDPE an example, and assuming China’s demand grows at an annual average of 5% between 2023 and 2030 (which is our base case), global capacity would have to be an average 1.8m tonnes a year lower than our base case for operating rates to return to their 2000-2022 average of 88%.

This demonstrates that the range and depth of your scenario planning needs to be stepped up to deal with the New Petrochemicals Landscape.

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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