Ethylene and derivatives (EPCA 2012 presentation)
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Ethylene and derivatives (EPCA 2012 presentation)

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Read the Ethylene and Derivatives presentation given at EPCA 2012 by Platts editor Nandita Lal. This presentation talks about the European ethylene market – coping with margin destruction; ...

Read the Ethylene and Derivatives presentation given at EPCA 2012 by Platts editor Nandita Lal. This presentation talks about the European ethylene market – coping with margin destruction; Polyethylene and PVC – Q4 destocking; and Glycols - will prices sustain as supplies ease?

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Ethylene and derivatives (EPCA 2012 presentation) Ethylene and derivatives (EPCA 2012 presentation) Presentation Transcript

  • Ethylene and derivativesNandita LalEditor Ethylene, Polyethylene & MEG
  • Agenda• European ethylene market – coping with margin destruction• Polyethylene and PVC – Q4 destocking begins?• Glycols- Will prices sustain as supplies ease
  • Spot and contract ethylene prices Record high
  • What’s moved the market this year? • Peaks and troughs become more extreme • Feedstock volatility remains main catalyst • Main drivers in both Q1, Q3 was stock replenishment • End of Q3 saw maintenance period: 2.67 million mt/year 4
  • Margin compression Negative spot margins
  • Naphtha vs. ethylene vs. LDPE Naphtha-ethylene spread narrows to 2008 levels 6
  • So what has Europe done? •Scaled back rates •Closed inefficient units 6000 Quarterly Ethylene Production 2005-2012 5000 4000 2005 2006 2007 3000 2008 2009 2010 2000 2011 2012 1000 0 Jan - Mar Apr - Jun Jul - Sep Oct - Dec Source: APPE
  • Comparative regional economics Average Steam Cracker Profitability Q4 2011 $/mt West Central North Middle China Asia World Europe Europe Asia East Net Feed Cost 498 551 756 216 255 340 590 Variable Cost 533 550 111 22 504 456 276 Fixed Cost 114 113 69 36 33 50 57 Ethylene Cost 1144 1214 936 274 791 846 922 Margin 222 99 285 943 338 243 276 ROI(%) 7.4 3 13.4 43.3 12.3 8.7 10.9 Source: CEFIC
  • Comparative regional plant utilization rates Source: CEFIC
  • Derivative rationalization • Ineos looking to sell its HDPE plants • Versalis plans to replace its LLDPE C8 plant with elastomers • Ineos is set to exit LLDPE C4
  • Shale gas developments to add to woes • Shale boom may accelerate the closure of almost 10% of European crackers capacity in the best case and 20% in the worst case in the next five years. • Europe to lose competitiveness in C2, likely to concentrate on C3 and C4.  BASF plans to build a new 155,000 mt per year butadiene extraction plant at its Antwerp, Belgium to start in 2014.  MOL plans a new butadiene plant in Tiszaujvaros, Hungary by 2015.  Versalis plans a new 70,000 metric tonne butadiene unit in Dunkirk, France to be on line by 2015.  LyondellBasell to debottleneck butadiene capacity in Wesseling,Germany 40% from 170,000 mt to 238,000 mt/yr by 2013. 11
  • Average HDPE profitability Source Booz and Company
  • What opportunities lie ahead?• Integrated PE complexes are unlikely to be replaced• The strong speciality chemical base of Europe• A world-scale cracker to cost between $4 billion and $5 billion- not all announcements likely to be followed 13
  • Polymer derivatives: Fundamentals for Q4 14
  • Converting industry also facing challenges High and volatile feedstocks Competitive finished products from Middle East and Asia 15
  • Glycols: Resisting the sell-off A spate of production issues lead to spike in MEG prices in Europe in touching highs since 2007. 16
  • Middle East, US and Europe contribute • Hurricane ISAAC limits USA supplies • Europe imports 80,000-100,000 mt/year from the USA • In August Ineos’ plant in Cologne, Germany; BASF in Ludwigshafen, Germany and PKN Orlen in Plock, Poland were on turnaround • In Middle East, SABIC, Equate and Petro Rabigh all had production issues 17