Demand growth for ethylene remains uncertain heading into 2024 as US economic growth is likely to slow this year after growing more than expected the prior two years.
US ethylene demand is expected to rise by 4.1pc to 37.7mn metric tonnes (t) in 2024 as long as the US and the broader, global economy can continue to chug along, according to Argus Consulting, a division of Argus Media whose work is independent of Argus' news and price assessment business.
Projected growth in ethylene demand in 2024 would follow 4pc growth in 2023 to 36.2mn t and similar growth in 2022, according to Argus Consulting. US demand rose by 5pc in 2019, the last full year before the Covid-19 pandemic struck the US, roiled the economy and unleashed surging inflation.
Federal Reserve policymakers are forecasting US GDP growth to slow to 1.4pc in the fourth quarter of 2024 from a year earlier, down from projected growth of 2.6pc at the end of 2023. But the Fed is forecasting three likely quarter-point rate cuts this year, bringing an end to the rate tightening that began in 2022 as inflation has slowed to an annual 3.1pc rate in November.
No new ethylene capacity in 2024
Since the startup of Bayport Polymer's 1mn metric tonne/yr Baystar ethane cracker in Port Arthur, Texas, in 2021, there has been no additional ethylene capacity added in the US Gulf coast region.
Shell's 1.6mn t/yr ethane cracker in Monaca, Pennsylvania, came on line in 2022, but struggled to remain operational, shutting down multiple times in the months following its initial startup.
The next scheduled capacity addition is an $8.5bn integrated polymers facility in Orange, Texas, planned by Chevron Phillips Chemical and QatarEnergy for 2026. The project will include a 2.08mn t/yr ethane cracker and two 1 mn t/yr high-density polyethylene units.
Ethylene is used for a variety of products, but most prominently it is polymerized to make polyethylene (PE), the most common plastic. It is also a feedstock for products that become anti-freezes, paints and solvents, as well as polyvinyl chloride (PVC) pipes and styrofoam.
In regards to polyethylene, scheduled added capacity for PE could increase ethylene demand in the coming year. New capacity from Shell and Nova are set to come on line by early 2024. Shell's unit in Monaca, Pennsylvania will add a total of 1.5mn t/yr of capacity, with 1mn t of that capacity having started in 2023 and the final 500,000 t expected to come online this year. Nova's unit in Alberta, Canada, will add total of 450,000 t/yr of new linear low density polyethylene (LLDPE) capacity.
Ethylene exports in 2024
Unpredictability around exports will also lead to uncertain ethylene demand in 2024.Recent low water levels at the Panama Canal are likely to last well into this year, continuing to squeeze vessel traffic through the canal. A decline in ethylene exports was recently reflected in trade data from Global Trade Tracker (GTT). US export data for October showed exports to China being halved.
The US exported 23,060t of ethylene to China in October, compared with 47,137t in September. Some of the decline in shipments was likely caused by the issues at the Panama Canal.
North American ethane crackers operated in the low to mid 80pc of capacity range for the majority of 2023.
With less ethylene capacity also being added globally in 2024, domestic operational rates can be expected to rise in order to capitalize on global demand.
Around 8mn t of global ethylene capacity was added in 2023, and around 5mn t of global capacity is expected to be added in 2024, according to Argus Consulting.
