A latest report by Chemical Market Associates, Inc. (CMAI) reveals that the global economic recession severely impacted olefin demand growth in conjunction with the start-up of significant quantities of new capacity that would have caused a "trough" in the petrochemical margin cycle even in the absence of the global economic recession. After a severe contraction in light olefins demand growth in 2008, global demand growth for 2009 will remain significantly below trend-line growth, adding pressure to a severely over-supplied market. The margin forecast suggests that 2009 will mark the beginning of a sustained period of poor earnings for light olefins and petrochemical producers in general; even though H1-2009 showed positive earnings for a number of petrochemical producers in Asia and light-feedstock based producers in the United States. However, this was not the case for heavy-feedstock based producers in the U.S. and Europe.
Ethylene demand growth is forecast to respond with a modest recovery in 2009 followed by muted growth in 2010. Strong and steady ethylene demand growth averaging between 4-5% pa is not forecast to resume until the 2011 - 2014 period. As a result, the total ethylene consumption volume will remain below historical trend-line growth over the next five years. Capital investments will continue to shift toward areas that offer either advantaged feedstock costs, such as many Middle Eastern countries, or rapid demand growth as exemplified by China. In the more mature regions, such as Europe, Japan and North America, slow ethylene demand growth and a more competitive international marketplace are expected to limit investments in new capacity. Instead a greater focus on cost efficiencies should result in improvements of energy usage, greater feedstock flexibility and plant modernizations.
Propylene production from traditional sources, such as steam crackers and FCC units associated with refineries, is forecast to decrease, encouraging investment in "other" propylene sources. Output from steam crackers will be limited by mainly ethane-based capacity additions in the Middle East that yield less propylene, and the persistence of cost advantages for NGLs that will encourage flexible units to preferentially crack lighter feedstocks. In addition, future FCC production of propylene is expected to slow significantly mainly in response to changing motor gasoline regulations/specifications in the U.S., which accounts for approximately one-third of global FCC propylene production.
Investments in "other" propylene sources will be based predominantly on the established technologies of metathesis and propane dehydrogenation. However, significant investments in newer on-purpose propylene technologies, such as olefin and deep catalytic cracking, are taking place. In addition, the first commercialization of methanol-to-olefins technology is imminent, with three plants scheduled to come on stream in China in 2010, all based on coal.