MOSCOW (MRC) -- Even before the arrival of coronavirus disease 2019 (COVID-19), world ethylene production capacity was set to grow far ahead of demand during 2020-22, and now the excess could swell by another 6 million metric tons/year (MMt/y) or more, according to Chemweek.
However, the outlook for producers may not be as gloomy as it seems. Although a first look at the data suggests a global nameplate operating rate of just 86% in 2020, a deeper look into actual operations shows that the effective operating rate could be as high as 95%, says Steve Lewandowski, vice president/olefins at IHS Markit. Lewandowski recorded his analysis for the IHS Markit World Petrochemical Conference 2020 Online, which runs Friday, 3 April to 17 April.
"I remain a bit more bullish than most because of the way the economics and the assets run," he says.
IHS Markit has sharply reduced its forecast for 2020 ethylene demand growth from 6–7 MMt/y to just 1 MMt/y or so. By contrast, the forecast for new production capacity has changed little. "We have pulled back a little bit of these projects because of the virus, but still some 12.5 MMt/y are expected to be onstream by the end of 2020," says Lewandowski.
Not all of this capacity will be available, however, owing to delays in start-up and ramp-up success. A heavy turnaround schedule will cut into the existing production base.
Feedstock availability is also a problem in some regions. "The advantage of importing ethane is reduced more and more," notes Lewandowski. "Will that capacity really be available to run?" Those steam crackers that can shift to heavier feedslates will not be able to produce as much ethylene.
China's coal-to-olefin (CTO) and methanol-to-olefin (MTO) units will be difficult to operate profitably, and integrated producers may choose to purchase ethylene for their downstream operations. "With the drop in oil price, the advantage of producing derivatives via methanol is really economically out of the money," says Lewandowski.
Each of these factors will boost operating rates above the forecast nameplate of 86%. "When I take out start-up and ramp-up, and I take out some of these feed limitations, the operating rate moves up to 89%," says Lewandowski. "When I go through the next tranche - derating because of feed switching, taking MTOs out, some capacity rationalization - I go to 93%. And going further down in MTO and CTO, I can move up to 95% operating rates."
We remind that, as MRC informed earlier, Sinopec Zhongyuan Petrochemical restarted its methanol-to-olefins (MTO) plant in China in mid-February 2019, following an unplanned outage. The was shut on November 5, 2018 owing to bearish market conditions. Located at Henan in China, the MTO plant has an ethylene and propylene capacity of 100,000 mt/year each.
Besides, Jiutai Energy Group undertook an emergency shutdown at its methanol-to-olefins (MTO) plant in Erods, Inner Mongolia on July 21, 2019 owing to mechanical issues. The plant remained off-line for about 4-5 days. Located in Inner Mongolia, the MTO plant has an ethylene capacity of 150,000 mt/year and propylene capacity of 200,000 mt/year.
Ethylene is the main feedstock for the production of polyethylene (PE).
According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 383,760 tonnes in the first two month of 2020, up by 14% year on year. High density polyethylene (HDPE) and linear low density polyethylene (LLDPE) shipments increased due to the increased capacity utilisation at ZapSibNeftekhim.
MRC