Viewpoint: Asian ethylene sector braces for new supply
The Asian ethylene market is preparing for a challenging year, with 11 ethylene crackers expected to come on line in 2021 — eight in China, two in South Korea and one in southeast Asia. But new derivative capacity may keep merchant ethylene supply balanced.
China is to lead the charge by adding eight ethylene crackers in 2021, with a total ethylene capacity of 7.8mn t/yr. This will raise China's effective ethylene capacity to 39.8mn t/yr by the end of this year, a 23pc increase from 2020.
The expansions come after the start-up of six greenfield ethylene crackers with total ethylene capacity of 6.8mn t/yr in 2020, which took effective ethylene capacity to 32.2mn t/yr by the end of last year, up by 21pc from 2019.
The ethylene market dodged any supply pressures from the rapid expansions last year. Unexpected plant shutdowns in South Korea and Japan, particularly in the fourth quarter, created a supply deficit across the region and drove up ethylene prices towards $1,000/t cfr northeast Asia from $700/t cfr northeast Asia in late August.
Four out of the six steam crackers that started up in 2020 do not trade merchant ethylene, instead keeping supplies balanced by supplying ethylene to their integrated downstream units. Only Liaoning Bora LyondellBasell sells about 8,000 t/month of merchant ethylene, mainly via vessels with a small portion transported by road.
Private-sector firm Wanhua Chemical's 1mn t/yr propane-fed cracker, the latest cracker start-up in China, will be short of about 8,000 t/month of ethylene once its downstream ethylene oxide (EO) unit starts up, likely this month. Its ethylene supply deficit will further increase by another 16,000 t/month from the end of 2021 following the start-up of its 650,000 t/yr styrene monomer (SM) unit.
The eight steam crackers coming on line in 2021 may not be able to supply much merchant ethylene either. Ningbo Huatai Shengfu's 600,000 t/yr gas cracker, which will likely start up in the first quarter, and the Gulei refinery's 1mn t/yr naphtha cracker in Fujian — which may come on line in the third quarter — are expected to each supply around only 9,000-10,000 t/month of ethylene.
Petrochemical producer Zhejiang Satellite's 1.25mn t/yr ethane-feed cracker is likely to be operational in the first quarter of 2021. At capacity, the company will need to buy 16,000 t/month of ethylene to feed its two mega EO/ethylene glycol (EG) plants and 400,000 t/yr high-density-polyethylene (HDPE) unit. But the EG plants are unlikely to run at full loads in an already oversupplied market.
Seeking balance
The remaining five new crackers are aiming to be self-balanced. These include Shandong independent Luqing Petrochemical's 750,000 t/yr heavy residual-fed cracker; state-controlled PetroChina's 800,000 t/yr ethylene plant in Shaanxi province that will use ethane from its Changqing gas field; PetroChina's 600,000 t/yr ethylene plant in Xinjiang that will crack ethane from its Tarim oilfield; and two 1.4mn t/yr mega crackers at private-sector Rongsheng's 800,000 b/d ZPC refinery. The former three crackers, all fully integrated with polyethylene (PE) capacity, are likely to start commercial operations around the third quarter of 2021.
ZPC will theoretically have about 170,000 t/yr of excess ethylene supplies from each of its two new 1.4mn t/yr cracker complexes. The No.2 cracker is likely to start up in the second quarter of 2021 and the No.3 cracker will come on line in the fourth quarter. The company sees ethylene as an intermediate product and does not plan merchant sales, but a leading Chinese trading firm nevertheless expects ZPC to still have 10,000-20,000 t/month of merchant ethylene supplies.
The additional but limited merchant ethylene supplies may not be able to cover incremental demand from new non-integrated downstream units, which is estimated at over 60,000 t/month for 2021.
State-controlled petrochemical firm Qingdao Haiwan started up a 400,000 t/yr vinyl chloride monomer (VCM) plant in early December 2019. Private-sector Sanjiang Chemical will bring on line a 300,000 t/yr VCM unit in February-March 2021. Anhui Jiaxi's 350,000 t/yr SM and Cangzhou Julong's 400,000 t/yr VCM plants are likely to start operations late in the first quarter or in the second quarter of 2021. There are also some capacity expansions at private-sector firm Jiangsu Sailboat's EO, state-controlled producer Sinopec Yangzi's ethylene vinyl acetate (EVA) and China-based Shanghai Chlor-Alkali Chemical's VCM plants.
Import upside
Chinese consumers are therefore requesting more ethylene term supplies for 2021, which may boost China's ethylene imports this year. China imported 1.67mn t of ethylene in January-October 2020 and total ethylene imports likely reached around 2mn t last year, a fall of 20pc from 2.5mn t in 2019.
The ethylene supply length may not be as pronounced as it seems, but there will be pressure on ethylene derivative markets. Downstream MEG capacity is expected to expand by 21pc in 2021 through the new integrated crackers, exceeding 19mn t/yr. The MEG overcapacity will aggravate the supply-demand balance, even after taking into account post-Covid-19 recovery in demand and likely growth of 7-8pc in 2021 compared with demand growth of 2-3pc in 2020. The average operating rate at Chinese MEG plants already declined to 70pc in 2020.
Around 3.5mn t/yr of new SM capacity is expected to come on stream in 2021, a surge of 35pc from current capacity of 10mn t/yr. Downstream operating rates reached highs of around 80pc in recent years on the back of brisk demand from downstream engineering plastics, but sentiment is starting to cool for the new year.
Capacity of PE, the largest ethylene downstream sector, will increase by 22pc to 28mn t/yr in 2021. This is in line with forecasts demand growth of 8-9pc for the year, a slight increase from 7pc in 2020.
Outside of China, South Korea is set to launch two greenfield crackers in 2021, the first for many years. GS Caltex, the second-largest refiner in South Korea after SKGC, is building a mixed-feed cracker with 700,000 t/yr of ethylene and 350,000 t/yr of propylene capacity. The cracker will use LPG, naphtha and refinery off-gases as feedstock. It is expected to start up around May-June 2021 and has an integrated 500,000 t/yr of PE capacity. The company will have a net length of around 200,000 t/yr of ethylene for merchant sales.
Korean petrochemical firm LG Chem's third cracker at Yosu is under construction and will be operational around July-August 2021. The cracker will have 800,000 t/yr of ethylene capacity and 800,000 t/yr of fully integrated PE capacity.
Southeast Asian expansions
Southeast Asia will also add a cracker in 2021, with Thai petrochemical producer PTT Global Chemical (PTTGC) aiming to start up its 500,000 t/yr naphtha cracker at Mab Ta Phut in early January after many delays. The cracker does not have any ethylene downstream units. Some of the new ethylene supply will be fed into PTTGC's existing PE plants and the rest will be sold.
Malaysia's state-owned Petronas expects to resume production at its large 1.29mn t/yr cracker complex at Pengerang — a joint venture with state-controlled Saudi Aramco — around March-April 2021 following an explosion in April 2020. But the impact on ethylene may be limited as the cracker is fully integrated into its MEG and PE production.
China cracker projects | 000 t/yr | |||||
Company | Location | Feedstock | 2020 | 2021 | Derivatives | C2 surplus |
Zhejiang Petchem (ZPC) No1 | Zhejiang | mostly naphtha | 1,400 | LLDPE 450, HDPE 300, EO/EG 50/750, SM 1,200 | 0 | |
Hengli Petchem | Liaoning | 1/2ethane1/2naphtha | 1,500 | HDPE 400, SM 720, MEG 1,800 | 0 | |
Liaoning Bora Petchem | Liaoning | mostly naphtha | 1,000 | LLDPE 450, HDPE 350, SM 350 | 98 | |
Sinochem Quanzhou Petchem | Fujian | mostly naphtha | 1,000 | EVA 100, HDPE 400, EO 200, MEG 500, SM 450 | 0 | |
Sinopec Zhongke Zhanjiang | Guangdong | mostly naphtha | 800 | EO/EG 250/400, HDPE 350, EVA 100 | 0 | |
Wanhua Chemical | Shandong | mostly propane | 1,000 | PVC 400, EO 150, HDPE 350, LLDPE 450, SM 650 | -297 | |
Subtotal | 6,700 | |||||
Ningbo Huatai Shengfu | Zhejiang | mostly refinery offgas | 600 | LLD-HD 400, SM 300 | 113 | |
Zhejiang Satellite | Jiangsu | only ethane | 1,250 | EO/EG 450/1,200, HDPE 400 | -200 | |
Luqing Petrochemical | Shandong | heavy residual | 750 | HDPE 350, LLDPE 400 | 0 | |
Zhejiang Petrochemical No2 | Zhejiang | mostly naphtha | 1,400 | LLDPE 450, EO/EG 100/650, EVA/LDPE 100/300, SM 600 | 100 (estimated) | |
PetroChina Changqing | Shaanxi | domestic ethane | 800 | HD/LLDPE 400, HDPE 400 | 0 | |
Gulei Refinery | Fujian | mostly naphtha | 1,000 | EVA 300, EO 270, EG 500, SM 600 | 114 | |
PetroChina Tarim Oilfield | Xinjiang | domestic ethane | 600 | HD/LLDPE 2*300 | 0 | |
Zhejiang Petrochemical No3 | Zhejiang | mostly naphtha | 1,400 | LLDPE 450, EO/EG 100/650, EVA/LDPE 100/300, SM 600 | 100 (estimated) | |
Subtotal | 7,800 | 227 | ||||
Source: Argus |
Related news posts
Lyondell Houston refinery to run at 95pc in 2Q
Lyondell Houston refinery to run at 95pc in 2Q
Houston, 26 April (Argus) — LyondellBasell plans to run its 264,000 b/d Houston, Texas, refinery at average utilization rates of 95pc in the second quarter and may convert its hydrotreaters to petrochemical production when the plant shuts down in early 2025. The company's sole crude refinery ran at an average 79pc utilization rate in the first quarter due to planned maintenance on a coking unit , the company said in earnings released today . "We are evaluating options for the potential reuse of the hydrotreaters at our Houston refinery to purify recycled and renewable cracker feedstocks," chief executive Peter Vanacker said on a conference call today discussing earnings. Lyondell said last year a conversion would feed the company's two 930,000 metric tonnes (t)/yr steam crackers at its Channelview petrochemicals complex. The company today said it plans to make a final investment decision on the conversion in 2025. Hydrotreater conversions — such as one Chevron completed last year at its 269,000 b/d El Segundo, California, refinery — allow the unit to produce renewable diesel, which creates renewable naphtha as a byproduct. Renewable naphtha can be used as a gasoline blending component, steam cracker feed or feed for hydrogen producing units, according to engineering firm Topsoe. Lyondell last year said the Houston refinery will continue to run until early 2025, delaying a previously announced plan to stop crude processing by the end of 2023. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
EU adopts Net-Zero Industry Act
EU adopts Net-Zero Industry Act
London, 26 April (Argus) — Members of the European Parliament (MEPs) have adopted Net-Zero Industry Act, which plans to allocate funds towards the production of net-zero technologies. The act provides a pathway to scale up development and production of technologies that are critical towards meeting the EU's recommendation of net-zero greenhouse gas (GHG) emissions by 2050. This would include solar panels, electrolysers and fuel cells, batteries, heat pumps, onshore and offshore wind turbines, grid technologies, sustainable biomethane, as well as carbon capture and storage (CCS). The act is designed to help simplify the regulatory framework for the manufacture of these technologies in order to incentivise European production and supply. It also sets a target of 40pc production within the EU for its annual "deployment needs" of these technologies by 2030. Time limits will be instated on permit grants for manufacturing projects, at 12 months if the manufacturing capacity is under 1 GW/yr and 18 months for those above that. It will introduce time limits of nine months for "net-zero strategic projects" of less than 1 GW/yr and 12 months for those above. This is further complemented by the introduction of net-zero strategic projects for CO2 storage, to help support the development of CCS technology. The act was met with positive reactions from the European Community Shipowners' Association (ECSA), which said the bill will set the benchmark for member states to match 40pc of the deployment needs for clean fuels for shipping with production capacity. ECSA said the Net-Zero Industry Act will be instrumental in supporting the shipping industry to meet targets set under FuelEU Maritime regulations , which are set to come into effect next year. By Hussein Al-Khalisy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
New technologies aim to boost SAF production
New technologies aim to boost SAF production
London, 26 April (Argus) — A likely rise in global demand for sustainable aviation fuel (SAF), underpinned by mandates for its use, is encouraging development of new production pathways. While hydrotreated esters and fatty acids synthesised paraffinic kerosine (HEFA-SPK) remains the most common type of SAF available today, much more production will be needed. The International Air Transport Association (Iata) estimated SAF output at around 500,000t in 2023, and expects this to rise to 1.5mn t this year, but that only meets around 0.5pc of global jet fuel demand. An EU-wide SAF mandate will come into effect in 2025 that will set a minimum target of 2pc, with a sub-target for synthetic SAF starting from 2030. This week the UK published its domestic SAF mandate , also targeting a 2pc SAF share in 2025 and introducing a power-to-liquid (PtL) obligation from 2028. New pathways involve different technology to unlock use of a wider feedstock base. US engineering company Honeywell said this week its hydrocracking technology, Fischer-Tropsch (FT) Unicracking, can be used to produce SAF from biomass such as crop residue or wood and food waste. Renewable fuels producer DG Fuels will use the technology for its SAF facility in Louisiana, US. The plant will be able to produce 13,000 b/d of SAF starting from 2028, Honeywell said. The company said its SAF technologies — which include ethanol-to-jet , which converts cellulosic ethanol into SAF — have been adopted at more than 50 sites worldwide including Brazil and China. Honeywell is part of the Google and Boeing-backed United Airlines Ventures Sustainable Flight Fund , which is aimed at scaling up SAF production. German alternative fuels company Ineratec said this week it will use South African integrated energy firm Sasol's FT catalysts for SAF production. The catalysts will be used in Ineratec's plants, including a PtL facility it is building in Frankfurt, Germany. The plant will be able to produce e-fuels from green hydrogen and CO2, with a capacity of 2,500 t/yr of e-fuels beginning in 2024. The e-fuels will then be processed into synthetic SAF. Earlier this month , ethanol-to-jet producer LanzaJet said it has received funding from technology giant Microsoft's Climate Innovation Fund, "to continue building its capability and capacity to deploy its sustainable fuels process technology globally". The producer recently signed a licence and engineering agreement with sustainable fuels company Jet Zero Australia to progress development of an SAF plant in north Queensland, Australia. The plant will have capacity of 102mn l/yr of SAF. Polish oil firm Orlen formed a partnership with Japanese electrical engineering company Yakogawa to develop SAF technology . They aim to develop a technological process to synthesise CO2 and hydrogen to form PtL SAF. The SAF will be produced from renewable hydrogen as defined by the recast EU Renewable Energy Directive (RED II) and bio-CO2 from biomass boilers, Orlen told Argus . By Evelina Lungu Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
P66 to sell German, Austrian retail business: Update
P66 to sell German, Austrian retail business: Update
Adds number of Phillips 66-owned gas stations in Germany and Austria, company response. Houston, 26 April (Argus) — US refiner Phillips 66 plans to sell its gas station business in Germany and Austria as part of a broader plan to divest non-core assets, the company said in earnings released today. The company sells to retail and wholesale customers under the JET gas station brand across 1,270 sites in Austria, Germany and the UK, according to the refiner's 2022 annual review. JET operated 813 gas station in Germany as of June 2023, according to the country's federal association of independent petrol stations and 154 sites in Austria according to the company website. Phillips 66 has a further 330 gas stations in Switzerland through a joint venture under the Coop brand, but those are not included in the sales effort. The refiner declined to provide details of the current number of sites for sale in Germany and Austria. Phillips 66 has undertaken multi-year cost-cutting projects and said this year it is considering selling some of its midstream assets to satisfy a planned $3bn in divestments. Late last year hedge fund Elliott Investment Management purchased a $1bn stake in the company, calling on it to refocus on its refining business and reduce operating costs. In Elliott's December activist letter to the refiner, the hedge fund said if Phillips 66 failed to make sufficient progress towards its cost-cutting goals, it would push for management changes and a sale of the company's stake in Chevron Phillips Chemicals (CPChem) — valued at about $15bn-20bn after taxes by the investor — and its European convenience stores and other non-operated midstream assets. Elliott previously targeted Canadian integrated Suncor, pushing for board changes and divestment of its 1,500 retail stores, which ultimately it did not sell. US refiner Marathon, however, agreed to sell its 3,900-store Speedway retail network in 2019 following pressure from Elliott, which had criticised its integrated downstream business model. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more