The massive buildup of ethylene capacity in the Middle East and Asia is progressing at a rapid pace initiating another down cycle. From 1995 to 2008, ethylene capacity increased by over 22 mln metric tons in Asia/Pacific, and by more than 13 mln tons in the Middle East. By 2015, these regions are projected to add an additional 41 mln metric tons of ethylene capacity. Access to low-cost feedstock and manufacturing economies of scale will comprise as the key factors for petrochemical companies through 2020, particularly Asian players like China, India and Singapore. With a significant cost-advantaged feedstock base, ethylene production in the Middle East will rank as the most competitive in the world. Given that the vast majority of this production targets export markets, this surge in supply will dramatically change trade dynamics.
Interestingly, the current key players in Asia from Japan and Taiwan will be at a disadvantage in the near future as newer world scale plants come on stream in the region. Several plants in these countries are not built as world-scale capacities and lack in economies of scale, and their profitability is hindered by higher price imported feedstock. World-scale capacities utilizing leading process technologies seem to be positioned well to achieve low manufacturing costs.
Integration seems to be a healthy option for petrochem makers to counter the current global economic calamity and deteriorating demand. Integration is the key to feedstock competitiveness- by way of reducing feedstock costs by sourcing optimum feedstock and optimizing feedstock quality.