The last five years have seen a dramatic improvement in profitability for aromatic producers. This is in contrast to the preceding ten years where returns were extremely poor, primarily resulting out of product over-supply. The recent improvement has been driven by a combination of good market growth accompanied by a particularly low rate of capacity addition. How long will the good times last for aromatic producers and what factors will influence change?
Consumption growth rates for benzene are declining due to a downturn in demand growth for its two largest derivatives ; styrene and cumene/phenol. Styrene has faced substitution pressure in its main derivatives markets, while the markets downstream of cumene/phenol, principally in polycarbonate, have matured following a period of rapid growth driven by entry into new application sectors. Growth in other sectors such as cyclohexane, nitrobenzene and LAB is more stable, but again higher in Asia than other regions. The market growth outlook for benzene is therefore slightly lower over the coming decade than it has been over the previous one. Average demand growth for benzene is forecast to drop from 4% to 3%

Over 90% of paraxylene consumption is for the production of PTA, with a declining amount consumed in the production of DMT. DMT is gradually being replaced by PTA with the exception of some niche applications such as PET film production where DMT offers some advantages. In mature markets, the polyester fiber industry has little to no growth or may even be declining, as manufacturing continues to move to China and other South East Asian countries that offer lower labour costs. The scale of the polyester fiber industry in Asia, however, is such that it is the major driver of global demand growth for paraxylene. Due to the focus of fiber activity in Asia Pacific, the region accounted for 70% of global paraxylene demand in 2006. The packaging sector is growing most rapidly, and in all regions. Film applications are considered mature and are a relatively small market compared to polyester fiber and PET packaging. Market growth for paraxylene is estimated to be marginally lower, with average demand growth predicted to drop from 8.5% to 5.5%. Asia and the Middle East account for almost all significant aromatic capacity developments. Majority of the new aromatic complexes currently under development are fully integrated back to the reformer.

As the growth in paraxylene consumption is much higher than that of benzene, aromatic complexes are increasingly selective towards paraxylene, and seek to minimise benzene production in the reformer and aromatic conversion. Configurations which maximize paraxylene production with minimum benzene co-product have become the norm.
Development in Asia is motivated by the same drivers - high economic growth and low labour cost - that make the region the centre of demand growth for aromatic and their derivatives. The region�s rapidly growing refining industry also provides the necessary feedstock and upstream integration for new projects. In the Middle East, much of the growth in ethylene production in recent years has come from gas-based steam crackers, and therefore comparatively little additional benzene has become available from steam cracking. While the Middle East does not enjoy such a significant competitive advantage on aromatic production as it does for olefins, development is underway in the region both as a means of diversification and to provide feedstock for entry into derivatives markets.
The development of styrene and phenol industries in the Middle East represents a major change for the region itself and has two advantages for the region�s producers. These are both providing an additional outlet for olefins, and exploiting their advantaged olefins production to add competitive advantage to their aromatics. There is no such advantage available downstream from paraxylene, however, as the main derivative, PTA, is more costly to transport than paraxylene, and Middle Eastern countries have no basis for competition with Asia further downstream. Most of the benzene produced in the Middle East will most likely be consumed locally, while most of the paraxylene will be exported. Development of aromatic capacity in the major Western markets is limited by the lack of new reforming and steam cracking capacity, and the comparatively unattractive project economics relative to Asia.

The operating rate for benzene will remain stable through 2007-8 before declining in 2009. The current global benzene operating rate of 80%, represents almost full utilization of available feedstock. The recent high value of benzene, plus the fact that refiners have minimal opportunity to leave benzene in fuel streams, means that almost all available benzene is extracted. The operating rate profile in future is expected to be unchanged, with utilization of benzene extraction capacity touching 80-85% during peak years. The current heavy slate of new capacity developments will drop global operating rates to 76% by 2010, even assuming the closure of some HDA capacity. Global operating rates for paraxylene are at the beginning of a steep downturn which will reach a nadir at 75% by 2010. The operating rate for 2007 is estimated at 87%, already some way below the 2004 peak of 92%.

Strong forecast growth for paraxylene will absorb the new capacity, allowing another cyclical peak by 2015. The Middle East will emerge as the global supplier of export material, approaching two million tpa by 2010. Middle Eastern exports will move both to Asia and Europe, while exports from the United States will decline.