The US "Hydrocarbon Processing" reports that the ethylene industry is an important part of the petrochemical industry. Ethylene is the main raw material of downstream petrochemical products. It can produce polyethylene, ethylene oxide, dichloroethane, ethylbenzene, linear alcohol, and vinyl acetate. Adhesives, chemicals, coatings, packaging, building materials, textiles, rubber and plastics are also based on ethylene.
The business cycle of the petrochemical market is directly related to the supply and demand of ethylene. The ethylene market is guided by user needs. This basic economic concept determines the cyclicity of the ethylene market. When supply exceeds demand, profits in the petrochemical industry fall, producers scale back project plans and capital expenditures, inefficient refineries are shut down, and global ethylene capacity declines. When supply falls short of demand, companies actively build new installations and expand production.
From the 1960s to the 1970s, the growth rate of ethylene capacity reached double digits. In the 1970s, ethylene supply increased steadily. From the mid-1980s to the end of the 1980s, the growth rate of ethylene demand remained at 3% to 4%. Due to the rapid growth of plastic and resin consumption, many companies in the 1990s established a number of new ethylene projects. From the last century to the mid-1990s, more than 50% of new ethylene capacity came from the Asia-Pacific region. In the late 1990s, global ethylene 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. As of the end of 2010, global ethylene capacity reached 140 million tons per year, and the new capacity was mainly concentrated in the Middle East and Asia Pacific. The ethylene industry in the Middle East benefits from low-cost natural gas raw materials, which increases ethylene production capacity and supports global trade targeted at European and Asian markets. China's petrochemical industry has also experienced incredible growth.
At present, the ethylene market is undersupplied, and new projects will occupy a dominant position in the petrochemical market in the future. It is expected that by 2016, global ethylene capacity will increase by 17%, exceeding 170 million tons per year. Most of the new ethylene capacity will be concentrated in Asia Pacific and the Middle East. At the same time, in the past 5 years, Middle East ethylene capacity has doubled to 26 million tons per year. Compared with the Asia-Pacific ethylene plant that uses naphtha as raw material, the Middle East has the advantage of cheap ethane feedstock and close to Asian and European export markets. This situation will change in the short term as cheap ethane feedstocks appear in other regions. Increasing competition and sharply rising production costs may force countries in the Middle East to set higher prices for petrochemical raw materials. Despite the reduced attractiveness of investment in the Middle East, the economics of new projects in the region remain substantial.
Rising olefin demand and the availability of large quantities of cheap ethane are changing the prospects of the US petrochemical industry. By 2017, new plants, bottleneck removal, capacity expansion and plant restarts will increase the U.S. ethylene capacity by nearly 30% to 30 million tons per year. New US projects will form a competitive landscape with the Middle East in the next decade.