Supply growth threatens to destabilize petrochemicals market

Oil&Gas Materials 24 August 2019 13:19 (UTC +04:00)

Baku, Azerbaijan, Aug.24

By Leman Zeynalova – Trend:

With a host of new market entrants looking to profit from the petrochemicals boom, supply growth threatens to destabilize the petrochemicals market and will affect profitability, Trend reports citing Wood Mackenzie research and consulting company.

Meanwhile, demand is under pressure as the sustainability agenda takes hold, warns the company.

“Over the last several years, ethylene producers have benefited from healthy profit margins and high utilization rates. But that position is starting to change as we head into a supply-led downturn. As new entrants join the market to take advantage of strong ethylene demand growth, investments will be made on a massive scale across China, North America and the Middle East. Investment levels will reach a peak around 2023 – 2024. With these new volumes coming online, global operating rates will drop before they recover around 2025, followed by an upside to the cycle,” said Wood Mackenzie.

Between 2025 - 2030, the company expects a significant pull-back in new investments, based on a well-supplied market and declining utilization and profitability in the previous cycle.

“Looking forward, higher cost assets will be feeling the pinch as the cost curve gets steeper. Rising crude oil prices and increases in competitive production volumes will put the pressure on margins. The threat of closure is likely to re-emerge over the next five to seven years,” said Wood Mackenzie.


Follow the author on Twitter: @Lyaman_Zeyn