50 Years of Pathways through the Ethylene Industry

Ethylene is the main raw material for downstream petrochemical products and can produce polyethylene, ethylene oxide, dichloroethane, ethylbenzene, linear alcohol and vinyl acetate. Adhesives, chemicals, coatings, packaging, building materials, textiles, rubber and plastics are all based on ethylene.

The cycle of the petrochemical market is directly related to the supply and demand of ethylene. The ethylene market is guided by user demand. This basic economic concept determines the periodicity of the ethylene market. When supply exceeds demand, profits in the petrochemical industry decline, producers reduce project plans and capital expenditures, inefficient refineries are shut down, and global ethylene production capacity declines. When supply is less than demand, companies are actively building new devices and expanding production.

From the 1960s to the 1970s, ethylene production capacity growth reached double digits. In the 1970s, ethylene supply grew steadily. From the mid-1980s to the end of the 1980s, the ethylene demand growth rate remained at 3% to 4%. Due to the rapid growth in the consumption of plastics and resins, many companies built a new batch of ethylene projects in the 1990s. From the last century to the mid-1990s, more than 50% of new ethylene production capacity came from the Asia-Pacific region. In the late 1990s, global ethylene production capacity increased to 92 million tons per year.

Since 2000, advances in materials and technology have made it possible to design and build larger ethylene plants. By the end of 2010, the global ethylene production capacity reached 140 million tons/year, and new production capacity was mainly concentrated in the Middle East and Asia Pacific region. The Middle East ethylene industry benefited from low-cost natural gas feedstocks, which increased ethylene production capacity and supported global trade for European and Asian markets. China's petrochemical industry has also experienced incredible growth.

At present, the ethylene market presents a situation of less than supply, and new projects will occupy the dominant position in the future petrochemical market. It is estimated that by 2016, the global ethylene production capacity will increase by 17% to more than 170 million tons per year. Most of the new ethylene production capacity will be concentrated in Asia Pacific and the Middle East. At the same time, in the past five years, the ethylene production capacity in the Middle East has doubled to 26 million tons per year. Compared with naphtha ethylene plants based on naphtha, the Middle East has the advantages of cheap ethane feedstock and export markets close to Asia and Europe. This situation will change in the short term as cheap ethane feedstocks appear in other regions. Increased competition and a sharp increase in production costs will force countries in the Middle East to set higher prices for petrochemical feedstocks. Despite the diminished attractiveness of investment in the Middle East, the economy of new projects in the region is still considerable.

The increase in olefin demand and the acquisition of large quantities of cheap ethane are changing the prospects of the US petrochemical industry. By 2017, new installations, debottlenecking, capacity expansion, and device restart will increase US ethylene production capacity by nearly 30% to 30 million tons per year. New US projects will compete with the Middle East in the next decade.