Ethylene upcycle estimated to start by early 2013

26-Apr-13

Dow Chemical expects an ethylene upcycle to start by early next year, the company's chief executive has been reported by ICIS news. "A positive ethylene cycle is imminent," said Dow CEO Andrew Liveris. He made his comments during an earnings conference call. "Our view is that tightening ethylene balances are just ahead, and global industry operating rates will climb to enable a cyclical run up, driven by sustained high rates in the Americas and limited new capacity that will come on line in this time frame.” Dow expects utilisation rates to approach 90% by early next year, Liveris said. At peak margins, the upcycle should provide Dow with an additional $2bn (€1.5bn) in earnings before interest, tax, depreciation and amortisation (EBITDA). The company's forecast assumes that world GDP will grow by 2.5-3.5%. However, if world GDP grows less than 2.5%, then there could be capacity reductions in countries that use disadvantaged feedstock. I have never seen a cash-cost curve on ethylene as steep as this one," he said. Because of the advent of shale gas, US plants have a substantial cost advantage because they have access to ethane and other natural gas liquids (NGLs), which they use as feedstock. Other parts of the world use naphtha, which is linked to oil prices. "The northeast Asians, the southeast Asians and the Europeans are very disadvantaged in a slow-growth economy or a no-growth economy," Liveris said.