Massive PE production capacity in the United States and other parts of the world will exceed demand growth and may take several years to digest in order to balance the supply and demand in the market. The US shale gas revolution and other projects in the region will bring 25 million tons / year New ethylene capacity, set off a 'war' in the global polyolefin market.
Shale gas evokes tide of ethylene construction
Only the United States will increase a large number of new PE capacity, the United States by 2019 will build 9 sets of ethylene cracking unit, ethylene production capacity of 9.2 million tons / year, the existing expansion of ethylene plant expansion will also increase ethylene production capacity 1.1 million tons / Year, both accounted for 34% of the total ethylene capacity in the United States.
By 2019, the United States will add 6.5 million tons of PE capacity per year, accounting for 40% of the PE capacity in the United States. In addition, the rest of the world is also increasing its PE capacity and is equivalent to the newly-added PE capacity of the United States In a relatively short period of time put into operation, the market is difficult to digest.
The two-year expansion of ethylene this ethylene boom, the new ethylene and PE production capacity far more than any other two years 40 years, mainly because the United States has a wealth of low-cost ethane feedstock, the United States petrochemical producers can rely on ethane Production of ethylene, compared with other naphtha-based businesses in the world, is a significant cost advantage for U.S. producers. With the support of ethane feedstock and the growing demand of downstream PE, many petrochemical companies are participating in this ethylene Project construction tide.
Natural gas purification plants in the United States have some flexibility in meeting the needs of these new ethylene plant ethane feedstocks.Those natural gas processing plants typically do not extract all of the ethane from the natural gas stream and instead retain part of the ethane in natural gas Fuel If the price of ethane rises sufficiently high, natural gas processing plants will be able to extract more of the ethane from the feed gas and sell it to petrochemical producers for cracking feedstocks for greater profit.
Gas processing plants close to the Gulf Coast will recover as much ethane as possible to meet the demand for an upcoming ethane cracker, and U.S. petrochemical producers will continue to maintain their cost advantage by the first half of 2018.
US ethane price advantage or disappear
However, a number of new ethylene projects will be added to the U.S. companies from the second half of 2018 to 2020. A new wave of ethylene capacity buildup will further increase demand for ethane, and as a result, the Gulf Coast will need to receive data from Ethane, a cost-effective gas processing plant that is farther offshore from the Gulf Coast and is more expensive to transport, will result in higher prices for ethane.
The higher price of ethane in the second half of 2018 will increase ethylene production costs in the United States, thereby eroding PE margins, while most of the PE produced in the United States will be exported to foreign markets to compete with other new PE plants.
High-end resin production capacity is also surge
New ethylene plants in the United States will provide raw materials for more advanced PE plants and many companies hope to achieve higher margins through the production of high-end PE products such as the new plant built by Chevron Phillips Chemical Company to produce new PE products, Basel's new PE resin plant will use the new Hyperzone technology.
Dow Corps, although acknowledged in the recent earnings report, has an imbalance in supply and demand of PE resin. However, the company's expansion project can not be halted and will continue to be implemented steadily. The Company will try its best to minimize the duration of supply and demand imbalances and reduce supply and demand Unbalanced influence.
For petrochemical producers, digesting rapidly increasing supply may take at least five years, he said, noting that these companies have two options either to accept lower margins in the next three to five years or to shut down older PEs Resin plant.If you choose the latter, these old PE capacity equivalent to the United States to build new PE capacity of 50% to 75%.