3:04 PM MDT | March 23, 2012 | By ROB WESTERVELT
The rapid transformation of the North American petrochemicals outlook will dominate discussions at key industry conferences over the next few weeks, including the American Fuel and Petrochemical Manufacturers’ International Petrochemical Conference, the National Plastics Expo, and IHS Chemical’s World Petrochemical Conference.
CW’'s cover story assesses the changed landscape in North America and how the surge in natural gas production has handed U.S. petrochemical makers a highly advantaged cost position (p. 19). Despite weak domestic demand, U.S. petrochemical makers are very profitable, particularly those exposed to ethane-based ethylene and key derivatives such as polyethylene and polyvinyl chloride.
Plans for major investments have returned, after a decade-long drought. Producers that have already signaled their intention to build new U.S. crackers include Dow Chemical, Chevron Phillips Chemical (CPChem), Sasol, and Shell Chemicals. Nearly 10 million m.t./year of ethylene capacity additions have been announced in North America. Further announcements are likely over the next few weeks.
U.S. markets do not need all that ethylene so producers must look to export markets, particularly Asia, which now accounts for 45% of petrochemical demand, according to IHS Chemical.
Continued expansion in high-growth economies, particularly China, will be key to assuring steady demand growth to absorb as much as 30 million m.t./year of ethylene capacity by 2020.
Our lead news story assesses the slow down in China (p. 7). China accounts for 22% of global industry demand, according to ACC estimates. Every one-percentage-point decline in China’s chemical production shaves 0.18 percentage points off headline global chemical industry growth, says Kevin Swift, ACC’s chief economist and managing director.
China’s year-over-year chemical production growth fell below 10% in September 2011 for the first time in two years, and it has continued to moderate through early 2012. China’s year-over-year production growth was 6.1% in February on a three-month moving average basis, according to ACC’s Global Chemical Industry Production report. That is still the strongest growth rate of any major country’s chemical industry. Global chemical output was up 1.9% year over year in February.
China could not sustain double-digit growth forever so a slowdown in growth was expected. Growth in China still positive, and China is likely to avoid the feared hard landing.