A report by CMAI has forecast that global ethylene demand will grow at an average of just below 5% pa, with polyethylene and ethylene oxide being they dominant drivers for growth during the outlook period. Global ethylene demand has grown historically by 4-5%pa, with a growth level at about 4.6% in 2007.
Ethylene derivative exports from the Middle East are expected to increase substantially due to new export-oriented ethylene and derivative capacity. Middle East producers are expected to export mostly polyethylene and ethylene glycol, shipping product to Asia (mainly China) and, to a lesser extent, West Europe and North America. As new Middle East export capacity comes online, North America will transition from a net export position to a more balanced position. The forecast for ethylene prices anticipates a sustained period of strong cash margins through 2008, defining the remainder of the current "cycle peak". Along with the robust margins expected through the 2006-2008 cycle peak, strong underlying energy and feedstock prices will hold ethylene prices at record levels for most of the cycle. However, from 2009 through 2012, all three key market influences (energy prices, feedstock prices and cash margins for ethylene producers) are forecast to decline, as the ethylene industry enters the cyclic downturn.
CMAI expects annual global propylene demand growth to average 5% pa through 2012, primarily based on expected strength in the polypropylene market. Demand expanded by 4-5% pa since 2002; however, in 2005 it slowed to about half of this rate. Strong growth has since resumed, with total propylene demand reaching 72 million tons in 2007. Propylene and propylene derivative trade is expected to increase due to the addition of export-oriented propylene and derivative capacity in they Middle East. Most of this product will be exported to Asia, mainly China.
North America will still maintain a significant, yet declining position as an exporter of propylene and propylene derivatives. West Europe will shift from a net exporter of propylene derivatives to a net importer over the next few years, as propylene feedstock supplies in this region become more scarce.