Global ethylene plant operating rate will drop below 90% in 2010

CSOS CEO Petrom Corp. (CSPC) CEOSimonLam said at the 12th “Chemical Weekly” China Chemical Industry Symposium held in Shanghai recently that despite the strong demand for ethylene in the Chinese market, a large number of new ethylene crackers will be built in China and the Middle East in the coming years. The continuous production of the equipment will make the global ethylene market oversupply. By 2010, the operating rate of ethylene plants in the world will be lowered by 5 percentage points to below 90%.

Lam said that in the next few years, global ethylene demand will grow at an average annual rate of 6%. By 2010, the world will add 30 million tons/year of ethylene demand. The current demand for ethylene in China is about 17 million tons per year, and will increase by 50% in the next few years. During the same period, the new ethylene capacity in the Middle East plan will be 16 million to 21 million tons per year, while China will add 12 million tons per year. As the new production capacity is faster than the demand growth rate, the operating rate of ethylene equipment in the world will be lowered by 5 percentage points to below 90% by 2010, which will put greater pressure on the profitability of the manufacturers.

Lam believes that the ethylene industry cycle is coming to an end, but the exact time is still uncertain. The timing of the ethylene business cycle will depend on the growth rate of demand and the production time of new capacity. If the production time is postponed, the business cycle will be extended, but this is only a matter of time.

Lam pointed out that although China is planning to build a large number of new ethylene crackers, China's ethylene supply will still depend on imports. About half of China's ethylene demand will still depend on imports by 2010. However, China’s desire for ethylene demand is still insufficient to absorb the large amount of new production capacity in China and the Middle East. This will force producers in the Middle East to the West to seek ethylene sales.

With the successive production of new capacity, the petrochemical industry will become increasingly competitive and some small crackers will be phased out. To win the competition, it is necessary to build more efficient and more efficient crackers, which must be integrated with raw material production. In March of last year, CSPC opened an 800,000-ton/year ethylene cracker and downstream derivative plant located in Daya Bay, China. The cracker can cleave light and heavy naphtha, and can also condense condensate and light crude oil from Africa and the Middle East. CNOOC is currently building a new refinery in the area and is expected to start production in 2008.

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