European companies to underperform North America
Increases in import duties into Europe from GCC countries, among others, on 1 January 2014, from 3% to 6.5%, did not have much effect in the first part of the year. A hike in imported volumes at the end of 2013, as sellers brought big volumes in to Europe in a move to avoid the new duties, took time to be absorbed, and buyers were relaxed. Ethylene and propylene contracts have fallen in the past couple of months, but instead of PE and PP prices falling in line with the contacts, product was tight enough for producers to be able to keep some of the monomer drops and improve margin. European economic forecasts have been adjusted down, with CEFIC dropping its growth forecast for the EU chemicals sector in 2015 to 1% from earlier predictions of 1.5%.
In Europe, the number of businesses active in the plastics industry - moldmakers, converters and recyclers, has declined. The plastics market appeared to stabilize somewhat in 2013, as per PlasticsEurope, the European association of plastics manufacturers, to predict “a slow recovery” for 2014. On the global level, Europe was the second largest plastics producer in 2013, accounting for 20% of the world’s total plastics production, just behind China, which remained in the lead with 24.8% of global plastics production. And while packaging, next to building and construction, is one of the strongest markets, a recent market report from PCI Films Consulting revealed that the growth of Europe’s flexible packaging market tapered for the second consecutive year due to declining demand. The growth slowdown reflects the fact that a number of economies in the Eurozone are still struggling with the effects of recession, which has reduced demand for packaged foods in these countries. The current development of the European plastic industry can be described as slow, but positive. The companies that have survived the past five years are leaner, tougher, and smarter than they used to be, and it looks as if their efforts are starting to pay off. As a result of technological innovations, the development of new materials, improved production and process efficiency, and new application gains, these survivors are starting to thrive. According to PlasticsEurope, Europe showed a growth of 6.6% for primary plastics, 7% for plastics products, and nearly 2% for the machinery sector for the period between January and February 2014.
The European polymer market is still adjusting to the pressures on global flows and pricing from substantial capacity additions using cheap feedstock in the Middle East, and the new plastics capacity being constructed in the US Gulf based on ethane from shale gas.
Chemicals industry earnings in Europe, Middle East and Africa (EMEA) and North America are likely to grow by 5-7% year on year in 2015. However, European companies are likely to underperform their North American rivals, as per ratings agency Moody’s. Stronger North American domestic growth and the feedstock advantage conferred by the development of the shale gas industry are likely to buoy EBITDA for North American players above their European counterparts. European growth will weaken, but commodity margins will make modest improvements in 2015, thanks to weaker oil prices. Europe is to remain the highest-cost region for ethylene, and European naphtha remains the highest-cost petrochemicals production feedstock compared to Asian naphtha, North American natural gas, and US ethane and propane according to Moody’s.
Scenario in 2014
In USA : 2015 looks to be a groundbreaking year for new PE plant projects, but it could also become the year of the new-plant shakeout, as per ICIS. Because of the ethylene derivative's extraordinary cost advantage, there are 17 planned new PE units in the US, including multiple projects at some sites, for a total of 8.1 mln tpa of capacity. Some will break ground in 2015, for scheduled start-ups in 2016-17. This represents a hypothetical 53% increase in the existing US capacity base, but some of the projects may get shelved. One big advantage PE producers have is that they often make their own ethylene, while propylene producers are not as integrated and tend not to make their own propylene. What could undercut PE's huge margins next year may already be happening because of a major decline in crude oil. US petrochemical and polymer prices track oil, rather than their primary raw material natural gas.
In Japan: An ongoing process of integration of naphtha crackers in Japan has been compelled by a loss of competitiveness. Japan's chemical companies are in competition to develop new olefin production processes. This competition is being intensified by the emergence of a steady stream of serious issues faced by them, as per ICIS Chemical Business. Also, the growing role of shale gas-based feedstocks is raising concerns over the resulting shortages of specific fractions from crackers. Japan's total number of crackers will be reduced to 12 and its ethylene capacity to 6.7 mln tpa by the end of 2016, down 15% from the end of 2013. Most of facilities already mothballed or to be permanently shut down are outdated and less profitable. Production of derivatives is to be stopped along with such moves. The country will also develop new olefin production processes amid steady stream of serious issues.
The Petrochem & Polymer Industry News
New Capacities & Expansions
* Nova Chemicals Corp. has started processing the first barrels of ethane supplied from natural gas associated with Bakken shale oil production at its ethylene and polyethylene complex in Joffre. The ethane was produced at Hess Corp.’s Tioga plant in North Dakota and transported across the border into Alberta via the Vantage pipeline, which connects to the Alberta Ethane Gathering System (AEGS) to Joffre.
* The new 1.5 mln tpa ethylene producing Borouge 3 cracker commenced commercial ethylene in the UAE. Capacities comprise 540,000 tpa HDPE and 350,000 tpa LLDPE.
* Chevron Phillips Chemical Company LP announced completion of ethylene expansion at its Sweeny complex in Texas to ramp up production to 4.3 bln lbs annually. With the addition of a tenth furnace to ethylene unit 33 at the complex, the expansion is expected to increase annual production by 200 mln lbs.
* Williams Partners LP has expanded ethylene capacity at its plant in Geismar, Louisiana to 1.95 bln lbs of ethylene per year, with Williams Partners’ share at approximately 1.7 bln lbs annually.
* Russia's OOO Tobolsk-Polymer facility, which became the largest Oleflex production unit in the world, is meeting design capacity of 510,000 mtpa of propylene at its facility in Western Siberia.
* China has seen start-up of some new plants with coal-to-olefin technology, as follows:
China Coal Shaanxi Yulin Energy with 300,000 tpa ethylene and PE capacity in Northwest China
Qinghai Salt Lake Industries with 400,000 tpa ethylene and PE capacity in North China
Legend Holding with 170,000 tpa ethylene and PE capacity in East China
* Propane dehydrogenation (PDH) units to come online-
China’s Ningbo Haiyue New Material Co. has started up a plant with propylene production capacity of 600,000 tpa
Yantai Wanhua Polyurethanes with 750,000 tpa propylene capacity in East China
Zhejiang Shaoxing Sanyuan Petchem with 450,000 tpa propylene capacity in East China
Zhejiang Satellite Petrochemical with 450,000 tpa propylene capacity in East China
* Chevron Phillips Chemical Company LP successfully commissioned and started up the world’s largest on-purpose 1-hexene plant. With worldwide supply capabilities, the 1-hexene unit is capable of producing 250,000 metric tpa (551,000,000 lbs.)
* Westlake Chemical Corp announced completion of its US$425 mln chlor-alkali plant in Geismar, La., with 350,000 tpa of chlorine capacity and 385,000 tpa of caustic soda capacity to support of its Ascension Parish manufacturing operations.
* Ineos Group said has signed an agreement to increase imports of ethane to Europe from USA for use in its petrochemicals plants. The company, which owns refineries and petrochemicals plants in Europe and elsewhere, said it signed an agreement with Consol Energy to import the ethane which is processed from shale oil for supplies would start from 2015.
* POLIEF, SIBUR's subsidiary, has completed its polyethylene terephthalate (PET) production expansion project to increase its capacity from 140,000 tpa to 210,000 tpa. As part of the expansion project, POLIEF has modernized its existing PET production lines and constructed a new line.
* RusVinyl's polyvinyl chloride (PVC) production facility in Kstovo (NizhnyNovgorod Region), ranking among Russia’s largest petrochemical investment projects, was inaugurated.
* ONGC Mangalore Petrochemicals Ltd (OMPL)'s Mangalore plant commenced regular commercial production of benzene and paraxylene from October 1.
* South China has witnessed commencement of its first ABS plant. CNOOC & LG Chem Petrochemicals Co. Ltd., a 50:50 joint venture between China’s state-owned CNOOC and Seoul-based LG Chem, has commenced production on its 150,000 ton phase one project in the spring of 2014.
* BASF announced start-up of a new butadiene extraction plant at its Verbund site in Antwerp, Belgium with annual production of 155,000 metric tons.
* Italian petrochemical company Versalis is to restart its 490,000 tpa steam cracker at Porto Marghera, Italy, in February to cover a shortfall of ethylene in northern Europe. Shell, whose 900,000 tpa Moerdijk cracker in the Netherlands was closed in October after a leak, asked Versalis to restart the plant.
* In a bid to meet surging demand for specialty polymers, Solvay will increase capacity at its Panoli plant at Gujarat, by 25% to support strong demand for its innovative ultra-high performance polymers KetaSpire and AvaSpire. Capacity expansion of the polyaryletherketone resin, used as a base to make KetaSpire PEEK and AvaSpire PAEK, is already underway to reach more than 1,000 tpa in Q3-2015.
* Borealis has expanded its PP compound plant in Itatiba, near Sao Paulo, Brazil including construction of an additional production building, two state-of-the-art PP compounding extruders, blending and raw material silos, warehouse facilities and a bagging line.
* Clariant announced the inauguration of an important new extension to its production facility in Roha, India. The expansion doubles its capacity at the facility for pigments and pigment preparations. Clariant has announced plans to build its newest masterbatches plant in greater Sydney Area, Australia, with plans of commissioning in Q4-2014. Clariant has also expanded its production capabilities and service support for its customers in Indonesia and South East Asia and Pacific (SEA&P).
* A. Schulman, Inc. has added equipment in its manufacturing facility in Dongguan, China to double the current masterbatch production capacity at the facility. The company plans to start up its Engineered Plastics production capacity by mid-2015 to meet the growing needs of the mobility and electric & electronics market.
* Pluss Polymers, one of the leading manufacturers of specialised polymers and phase-change materials (PCMs), is aiming for manifold increase in overseas business by tapping into new markets and strengthening its existing base across the world.
* Lubrizol Corp announced groundbreaking for a new 55,000 tpa TempRite® chlorinated polyvinyl chloride (CPVC) compounding plant in Dahej, India, at an estimated investment over US$50 mln.
* In a bid to cater to the booming demand from automotive markets, Japan Polypropylene Corporation (a joint venture between Mitsubishi Chemical and JNC Corp.) has announced plans to expand PP compounding capacity in North America and China in 2015. Wholly-owned subsidiary Mytex Polymers will increase its capacity by 20,000 tpa to 93,000 tpa, while Beijing Ju-Ling-Yan Co. Ltd, (55%-owned by JPP) plans to raise capacity by 10,000 tpa to reach 76,000 tpa. Currently, these plants are running at full rates. Further capacity expansions are planned for 2016 at JPP's global compounding operations.
* Invista has started construction of a 150,000 tpa polyamide (PA) 66 plant at the Shanghai Chemical Industry Park (SCIP) in China