Views:5 Author:Site Editor Publish Time: 2019-10-21 Origin:Site
Over time, last October, the European petrochemical industry was still in a bull market, and the market situation was particularly optimistic. A year later, the European petrochemical industry was shrouded in uncertainty. In stark contrast to last year's situation, the global economic stagnation, continued trade friction, the imminence of Brexit in the UK, and shrinking production in the European chemical industry have all added together, making the prospects for European petrochemical companies difficult.
The economic situation is not optimistic
For chemical companies, the macroeconomic slump has caused a serious blow to corporate confidence, and the cautiously optimistic expectations at the beginning of the year have turned to pessimism. IHS Markit predicts that the European GDP growth rate in 2019 will be 1.1%, a decrease of 0.8 percentage points from last year.
Against this background, the chemical industry performed poorly. The German Chemical Industry Association (VCI) said the performance of the German chemical industry in the second quarter was \"disappointing\". Both production volume and capacity utilization rate declined slightly, and sales were stagnant. German domestic chemical demand is weak, and European demand is also declining. Compared with the same period last year, the German chemical industry's output in the second quarter plunged 8.8%, and fell 0.7% compared with the first quarter of 2019. In this regard, Van Buren, President of VCI and Chairman of Henkel's Board of Directors, said that the problem was that the German economy's recovery in the second half of the year was not realized.
Global trade frictions also have an impact on Europe. According to statistics from the European Chemical Industry Association (Cefic), due to changes in trade flows caused by global trade frictions, European petrochemical import levels have risen significantly since this year. Cefic said that the most significant change was the rapid growth in imports of petrochemicals from the United States, up nearly 12% year-on-year to 6.4 billion euros. Kevin Longworth, deputy director of polyolefins at IHS Markit, said that due to Sino-U.S. trade frictions, Europe’s market share in accepting U.S. polyethylene exports soared from 6% in the first half of 2018 to 14% in the first half of 2019, and the US PE resin accounted for the European market The share increased from 10% in the first half of 2018 to 26% in the first half of 2019. This has squeezed the European domestic market.
However, despite the market uncertainty, the profitability of European olefin plants is still good so far. Some crackers in Europe have used a lot of imported light raw materials this year. IHS Markit said that the profit margin of crackers using these raw materials in Europe is higher than any other region in the world. But when the economic downturn continues, companies may not always be able to maintain good performance. Shell CEO Ben Van Burden said that the European petrochemical trade environment is very fragile. Nordic Chemicals CEO Stern warned that the profit margin of the European integrated polyolefin business will be under pressure in the second half of this year.
The output of equipment shutdowns fell
From September to October, a series of European cracking units were scheduled to be shut down for maintenance, and the unplanned shutdown of multiple units increased the decline in European olefin production, which exacerbated the bearish sentiment in the market.
IHS Markit’s monthly report on light olefins in Europe/Middle East states that this planned overhaul will bring the total European ethylene production in September to a record monthly low in November 2008. Among them, the shutdown period of cracking units in Germany, the Netherlands and the United Kingdom was as long as 8 weeks, and unplanned shutdowns of ethylene cracking units in Belgium and Portugal also affected production. Ineos, ExxonMobil, BASF, BP, SABIC, Dow, Repsol and Shell have all shut down units with an annual output of several hundred thousand tons. The report said: \"Centralized shutdown caused a significant reduction in ethylene supply. It is expected that at least 20% of ethylene production capacity will be lost in Western Europe in September. As the planned large-scale shutdown will continue until October, the European petrochemical industry is facing huge operating pressure and going further Increase the risk of technical problems in other companies.\"
For propylene, in addition to the shutdown of the cracking unit, the shutdown of some refineries in Europe also caused a loss of production. The IHS report said: \"The situation of a substantial reduction in the supply of propylene will continue from late September to October.\"
The olefin derivative products are also not optimistic. IHS Markit reports that the propylene derivatives industry is facing potential pressure due to weakening activity in the automotive and construction industries. Although the prices of raw materials in Asia and Europe have returned to comparable levels, carbonyl alcohol products are still struggling, propylene oxide is still in a downturn, and phenol is facing import pressure, which further strengthens the pressure of local European producers.
The aromatics market is weakened by the decline of the automotive industry and the construction industry. David Potter, director of aromatics and phenol products at IHS Markit, said that due to the global economic slowdown, changes in global production capacity and trade flows, European light vehicle production fell by 6% in the first half of 2019, significantly hurting demand for benzene value chain products. In addition, the increase in external capacity in Europe has seriously affected the European export market.
Project earnings outlook is unknown
Despite the sluggish sentiment in the European petrochemical industry, several major olefin projects in the region continue to progress as scheduled, especially some projects that use light cracking feedstocks, including the propane dehydrogenation (PDH) plant under construction in Antwerp, Belgium And Ineos built a ethane cracker at the same location. According to related companies, everything went according to plan. Nordic Chemical's PDH project in Antwerp plans to produce 750,000 tons/year of propylene. The project has an investment of 1 billion euros and is scheduled to be put into operation in mid-2022. Ineos plans to build a PDH plant with a propylene production capacity of 750,000 tons/year, which will be put into operation in mid-2023, and its 1.25 million tons/year cracking project will be put into operation in 2024, all using U.S. ethane.
In addition, Polish Grupa Azoty is also promoting the construction of its 400,000-ton/year PDH plant in Police, Poland, which will also use UOP's Oleflex technology. The petrochemical project, which cost 1.5 billion euros, will be completed in the fourth quarter of 2022, and the annual output of the PP plant will reach 437,000 tons.
According to the IHS Markit European/Middle East Low Carbon Olefin Market Report, the short-term prospects for the European petrochemical market may be brighter. However, once the supply improves, the profit margin of the ethylene industry will face some pressure, and it is expected that 2020 will not be a strong year for the petrochemical industry.