Published on December 11, 2014
The next wave of cyclicality is upon the petrochemical industry, and in the up-cycle most industry players, however the down-cycle affects the businesses that lack the access to less-expensive hydrocarbons.
The next highest point in the petrochemicals cycle is expected to occur by the end of 2015 or early 2016. This peak could be accompanied by a sluggish pace of growth in China, especially because of increased capacity build-up.
The Middle East is cracking heavier feeds to balance lack of abundant cheap gas. Russia is also boosting its capacity, which will flow into the export market. Also, shale based capacity expansions could lead to reduced capacity in other parts of the world.
LPG is gaining importance primarily because it’s less expensive than naphtha. Liquid crackers are being retooled to crack around 30 per cent of LPG, a trend that can be seen in Europe and Asia- regions that until now were dominated by naphtha crackers.
LPG is becoming an attractive option for PDH projects, majority of which are under construction in China, and as a result Asia now accounts for a quarter of all LPG exports. Far East is expected to use around 350,000-400,000 tonnes of LPG per month, and the feedstock will be sourced from the US.
European players are also boosting efficiency through energy conservation programmes, upgrading product stream that comes from naphtha crackers and by implementing of utility integration model. They are also planning on replacing three old crackers with one large, stat-of-the-art plant.
Japanese petrochemical producers processing naphtha are planning on shutting down local capacity and investing in joint ventures in other parts of the region. For instance, Asahi Kasei has shut down three acrylonitrile plants in Japan and set up one in Thailand. Mitsui Chemicals has also closed some plants, including phenol and bisphenol-A in Japan, and constructed a synthetic elastomers plant in Singapore.
Experts anticipate around 1.3 mtpa of ethylene capacity to be shut within the next two years, which will lead to a fall in naphtha use in Japan by about 4 mtpa.
