Viewpoint: Asian ethylene sector braces for new supply

: LPG, Oil products, Petrochemicals
21/01/05

The Asian ethylene market is preparing for a challenging year, with 11 ethylene crackers expected to come on line in 2021 — eight in China, two in South Korea and one in southeast Asia. But new derivative capacity may keep merchant ethylene supply balanced.

China is to lead the charge by adding eight ethylene crackers in 2021, with a total ethylene capacity of 7.8mn t/yr. This will raise China's effective ethylene capacity to 39.8mn t/yr by the end of this year, a 23pc increase from 2020.

The expansions come after the start-up of six greenfield ethylene crackers with total ethylene capacity of 6.8mn t/yr in 2020, which took effective ethylene capacity to 32.2mn t/yr by the end of last year, up by 21pc from 2019.

The ethylene market dodged any supply pressures from the rapid expansions last year. Unexpected plant shutdowns in South Korea and Japan, particularly in the fourth quarter, created a supply deficit across the region and drove up ethylene prices towards $1,000/t cfr northeast Asia from $700/t cfr northeast Asia in late August.

Four out of the six steam crackers that started up in 2020 do not trade merchant ethylene, instead keeping supplies balanced by supplying ethylene to their integrated downstream units. Only Liaoning Bora LyondellBasell sells about 8,000 t/month of merchant ethylene, mainly via vessels with a small portion transported by road.

Private-sector firm Wanhua Chemical's 1mn t/yr propane-fed cracker, the latest cracker start-up in China, will be short of about 8,000 t/month of ethylene once its downstream ethylene oxide (EO) unit starts up, likely this month. Its ethylene supply deficit will further increase by another 16,000 t/month from the end of 2021 following the start-up of its 650,000 t/yr styrene monomer (SM) unit.

The eight steam crackers coming on line in 2021 may not be able to supply much merchant ethylene either. Ningbo Huatai Shengfu's 600,000 t/yr gas cracker, which will likely start up in the first quarter, and the Gulei refinery's 1mn t/yr naphtha cracker in Fujian — which may come on line in the third quarter — are expected to each supply around only 9,000-10,000 t/month of ethylene.

Petrochemical producer Zhejiang Satellite's 1.25mn t/yr ethane-feed cracker is likely to be operational in the first quarter of 2021. At capacity, the company will need to buy 16,000 t/month of ethylene to feed its two mega EO/ethylene glycol (EG) plants and 400,000 t/yr high-density-polyethylene (HDPE) unit. But the EG plants are unlikely to run at full loads in an already oversupplied market.

Seeking balance

The remaining five new crackers are aiming to be self-balanced. These include Shandong independent Luqing Petrochemical's 750,000 t/yr heavy residual-fed cracker; state-controlled PetroChina's 800,000 t/yr ethylene plant in Shaanxi province that will use ethane from its Changqing gas field; PetroChina's 600,000 t/yr ethylene plant in Xinjiang that will crack ethane from its Tarim oilfield; and two 1.4mn t/yr mega crackers at private-sector Rongsheng's 800,000 b/d ZPC refinery. The former three crackers, all fully integrated with polyethylene (PE) capacity, are likely to start commercial operations around the third quarter of 2021.

ZPC will theoretically have about 170,000 t/yr of excess ethylene supplies from each of its two new 1.4mn t/yr cracker complexes. The No.2 cracker is likely to start up in the second quarter of 2021 and the No.3 cracker will come on line in the fourth quarter. The company sees ethylene as an intermediate product and does not plan merchant sales, but a leading Chinese trading firm nevertheless expects ZPC to still have 10,000-20,000 t/month of merchant ethylene supplies.

The additional but limited merchant ethylene supplies may not be able to cover incremental demand from new non-integrated downstream units, which is estimated at over 60,000 t/month for 2021.

State-controlled petrochemical firm Qingdao Haiwan started up a 400,000 t/yr vinyl chloride monomer (VCM) plant in early December 2019. Private-sector Sanjiang Chemical will bring on line a 300,000 t/yr VCM unit in February-March 2021. Anhui Jiaxi's 350,000 t/yr SM and Cangzhou Julong's 400,000 t/yr VCM plants are likely to start operations late in the first quarter or in the second quarter of 2021. There are also some capacity expansions at private-sector firm Jiangsu Sailboat's EO, state-controlled producer Sinopec Yangzi's ethylene vinyl acetate (EVA) and China-based Shanghai Chlor-Alkali Chemical's VCM plants.

Import upside

Chinese consumers are therefore requesting more ethylene term supplies for 2021, which may boost China's ethylene imports this year. China imported 1.67mn t of ethylene in January-October 2020 and total ethylene imports likely reached around 2mn t last year, a fall of 20pc from 2.5mn t in 2019.

The ethylene supply length may not be as pronounced as it seems, but there will be pressure on ethylene derivative markets. Downstream MEG capacity is expected to expand by 21pc in 2021 through the new integrated crackers, exceeding 19mn t/yr. The MEG overcapacity will aggravate the supply-demand balance, even after taking into account post-Covid-19 recovery in demand and likely growth of 7-8pc in 2021 compared with demand growth of 2-3pc in 2020. The average operating rate at Chinese MEG plants already declined to 70pc in 2020.

Around 3.5mn t/yr of new SM capacity is expected to come on stream in 2021, a surge of 35pc from current capacity of 10mn t/yr. Downstream operating rates reached highs of around 80pc in recent years on the back of brisk demand from downstream engineering plastics, but sentiment is starting to cool for the new year.

Capacity of PE, the largest ethylene downstream sector, will increase by 22pc to 28mn t/yr in 2021. This is in line with forecasts demand growth of 8-9pc for the year, a slight increase from 7pc in 2020.

Outside of China, South Korea is set to launch two greenfield crackers in 2021, the first for many years. GS Caltex, the second-largest refiner in South Korea after SKGC, is building a mixed-feed cracker with 700,000 t/yr of ethylene and 350,000 t/yr of propylene capacity. The cracker will use LPG, naphtha and refinery off-gases as feedstock. It is expected to start up around May-June 2021 and has an integrated 500,000 t/yr of PE capacity. The company will have a net length of around 200,000 t/yr of ethylene for merchant sales.

Korean petrochemical firm LG Chem's third cracker at Yosu is under construction and will be operational around July-August 2021. The cracker will have 800,000 t/yr of ethylene capacity and 800,000 t/yr of fully integrated PE capacity.

Southeast Asian expansions

Southeast Asia will also add a cracker in 2021, with Thai petrochemical producer PTT Global Chemical (PTTGC) aiming to start up its 500,000 t/yr naphtha cracker at Mab Ta Phut in early January after many delays. The cracker does not have any ethylene downstream units. Some of the new ethylene supply will be fed into PTTGC's existing PE plants and the rest will be sold.

Malaysia's state-owned Petronas expects to resume production at its large 1.29mn t/yr cracker complex at Pengerang — a joint venture with state-controlled Saudi Aramco — around March-April 2021 following an explosion in April 2020. But the impact on ethylene may be limited as the cracker is fully integrated into its MEG and PE production.

China cracker projects						000 t/yr
Company	Location	Feedstock	2020	2021	Derivatives	C2 surplus
Zhejiang Petchem (ZPC) No1	Zhejiang	mostly naphtha	1,400		LLDPE 450, HDPE 300, EO/EG 50/750, SM 1,200	0
Hengli Petchem	Liaoning	1/2ethane1/2naphtha	1,500		HDPE 400, SM 720, MEG 1,800	0
Liaoning Bora Petchem	Liaoning	mostly naphtha	1,000		LLDPE 450, HDPE 350, SM 350	98
Sinochem Quanzhou Petchem	Fujian	mostly naphtha	1,000		EVA 100, HDPE 400, EO 200, MEG 500, SM 450	0
Sinopec Zhongke Zhanjiang	Guangdong	mostly naphtha	800		EO/EG 250/400, HDPE 350, EVA 100	0
Wanhua Chemical	Shandong	mostly propane	1,000		PVC 400, EO 150, HDPE 350, LLDPE 450, SM 650	-297
Subtotal			6,700
Ningbo Huatai Shengfu	Zhejiang	mostly refinery offgas		600	LLD-HD 400, SM 300	113
Zhejiang Satellite	Jiangsu	only ethane		1,250	EO/EG 450/1,200, HDPE 400	-200
Luqing Petrochemical	Shandong	heavy residual		750	HDPE 350, LLDPE 400	0
Zhejiang Petrochemical No2	Zhejiang	mostly naphtha		1,400	LLDPE 450, EO/EG 100/650, EVA/LDPE 100/300, SM 600	100 (estimated)
PetroChina Changqing	Shaanxi	domestic ethane		800	HD/LLDPE 400, HDPE 400	0
Gulei Refinery	Fujian	mostly naphtha		1,000	EVA 300, EO 270, EG 500, SM 600	114
PetroChina Tarim Oilfield	Xinjiang	domestic ethane		600	HD/LLDPE 2*300	0
Zhejiang Petrochemical No3	Zhejiang	mostly naphtha		1,400	LLDPE 450, EO/EG 100/650, EVA/LDPE 100/300, SM 600	100 (estimated)
Subtotal				7,800		227
Source: Argus

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24/11/21

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Cost of government support for fossil fuels still high

24/11/21

Cost of government support for fossil fuels still high

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Cop: Talks in Baku torn between mitigation and finance

24/11/21

Cop: Talks in Baku torn between mitigation and finance

Edinburgh, 21 November (Argus) — Developing and developed nations remain at loggerheads on what progress on climate finance and mitigation — actions to cut greenhouse gas emissions — should look like at the UN Cop 29 climate summit. But Cop 30 host Brazil has reminded parties that they need to stick to the brief, which is finance for developing countries. Concluding a plenary where parties, developed and developing, listed grievances, environment minister Marina Silva recognised "the excellent progress achieved" on mitigation at Cop 28. She listed paragraphs of the Cop 28 deal, including the energy package and its historic call to transition away from fossil fuels in energy systems. "We are on the right track," she said, talking about mitigation, but "our greatest obligation at this moment is to make progress with regard to financing". "This is the core of financing that will pave our collective path in ambition and implementation at Cop 30," Silva said, adding that $1.3 trillion for developing countries should be "the guiding star of this Cop". Parties are negotiating a new collective quantified goal (NCQG) — a new climate finance target — building on the $100bn/yr that developed countries agreed to deliver to developing countries over 2020-25. But developed countries insist that a precise number for a goal can only be produced if there is progress on mitigation and financing structure for the NCQG. "Otherwise you have a shopping basket but you don't know what's in there," EU energy commissioner Wopke Hoekstra said. Some developing nations said they need the "headline number first". Some developing countries, including Latin American and African nations as well as island states, have also complained about the lack of mitigation ambition. Cop is facing one of the "weakest mitigation texts we have ever seen," Panama said. But they also indicated that financial support was missing to implement action. Developed countries at Cop 29 seek the implementation of the energy pledges made last year. "What we had on our agenda was not just to restate the [Cop 28] consensus but actually to enhance and to operationalise that," but the text goes in the opposite direction, Hoekstra said, talking about the latest draft on finance. Whether hints that Brazil has mitigation in focus for next year's summit will be enough to assuage concerns from developed countries at Cop 29 on fossil fuel ambitions remains to be seen. The communique of the G20, which the country hosted, does not explicitly mention the goal to transition away from fossil fuels either. The developed countries' mitigation stance grew firmer after talks on a work programme dedicated to mitigation, the obvious channel for fossil fuel language, was rescued from the brink of collapse last week. Discussions have stalled, but another text — the UAE dialogue which is meant to track progress on the outcomes of Cop 28 — still has options referring to fossil fuels. But in these negotiations too, divisions remain. "The UAE dialogue contains some positive optional language on deep, rapid and sustained emissions reductions and the [Cop 28] energy package, E3G said. But Saudi Arabia has made clear that this was unacceptable, while India, which worked to water down a coal deal at Cop 26, is pushing back on the 1.5°C temperature limit of the Paris Agreement. Negotiators are starting to run out of time. Draft after draft, the divide fails to be breached with no agreement on an amount for the finance deal. "We cannot talk about a lower or higher number because there is no number," noted Colombia's environment minister Susana Muhamad. The next iteration should have numbers based on the Cop 29 presidency's "view of possible landing zones". The fact that the draft text on finance has no bridging proposal is a concern, non-profit WRI director of international climate action David Waskow said. Finance was always meant to be the centrepiece of Cop 29. Parties have not formally discussed the goal in more than 15 years, and have been trying to prepare for a new deal through technical meetings for the past two years. But the discussion needs to end in Baku. By Caroline Varin Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: EU, four countries commit to 1.5°C climate plans

24/11/21

Cop: EU, four countries commit to 1.5°C climate plans

Baku, 21 November (Argus) — The EU, Canada, Mexico, Norway and Switzerland have committed to submit new national climate plans setting out "steep emission cuts", that are consistent with the global 1.5°C temperature increase limit sought by the Paris Agreement. The EU and four countries made the pledge at the UN Cop 29 climate summit in Baku, Azerbaijan today, and called on other nations to follow suit — particularly major economies. Countries are due to submit new climate plans — known as nationally determined contributions (NDCs) — covering 2035 goals to the UN climate body the UNFCCC by early next year. The EU, Canada, Mexico, Norway and Switzerland have not yet submitted their plans, but they will be aligned with a 1.5°C pathway, EU climate commissioner Wopke Hoekstra said today. The Paris climate agreement seeks to limit the global rise in temperature to "well below" 2°C and preferably to 1.5°C. Canada's NDC is being considered by the country's cabinet and will be submitted by the 10 February deadline, Canadian ambassador for climate change Catherine Stewart said today. Switzerland's new NDC will also be submitted by the deadline, the country's representative confirmed. Pamana's special representative for climate change Juan Carlos Monterrey Gomez also joined the press conference today. Panama, which is designated as carbon negative, submitted an updated NDC in June. It is planning to submit a nature pledge, Monterrey Gomez said. "It is time to streamline processes to get to real action", he added. The UK also backed the pledge. The UK announced an ambitious emissions reduction target last week. The UAE — which hosted Cop 28 last year — released a new NDC just ahead of Cop 29, while Brazil, host of next year's Cop 30, released its new NDC on 13 November during the summit. Thailand yesterday at Cop 29 communicated a new emissions reduction target . Indonesia last week said that it intends to submit its updated NDC ahead of the February deadline, with a plan placing a ceiling on emissions and covering all greenhouse gases as well as including the oil and gas sector. Colombia also indicated that its new climate plan will seek to address fossil fuels, but it will submit its NDC by June next year . By Georgia Gratton Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Cop: EU says finance draft text not acceptable

24/11/21

Cop: EU says finance draft text not acceptable

Baku, 21 November (Argus) — The latest draft of the text on climate financing presented at the UN Cop 29 climate summit is not ambitious enough on mitigation — reducing emissions — and "clearly unacceptable," EU energy commissioner Wopke Hoekstra said today. Parties must agree at Cop 29, in Baku, Azerbaijan, on a new collective quantified goal (NCQG) — a new climate finance target — building on the $100bn/yr that developed countries agreed to deliver to developing countries over 2020-25. The text is the main outcome for the summit. "What we had on our agenda was not just to restate the [Cop 28] consensus but actually to enhance that and to operationalise that," but the text goes in the opposite direction, Hoekstra said. Parties to last year's Cop 28 summit in Dubai made an historic pledge to "transition away" from all fossil fuels. The EU has warned against any backsliding on this pledge . "We cannot accept the view that the previous Cop did not happen," Hoekstra said. A draft text on the mitigation work programme — a process that focuses on emissions reduction — was released by the Cop 29 presidency in the early hours of this morning. It does not mention phasing out or reducing fossil fuels in energy systems, or reference the agreement reached on the latter point at Cop 28 last year. Hoekstra indicated today's text does not provide enough clarity to allow the EU to put a concrete number on the amount of climate finance that should be available. The bloc has insisted the final number for climate financing can come only when other elements, including the structure and contributor base, are settled. But recipient country groups such as the G77 and Like-Minded Developing Countries (LMDC) groups have expressed impatience at the lack of a concrete number. Minor bright spots in the numerous draft texts released overnight include those on Article 6, which governs international carbon credits, Hoekstra said. But the commissioner is "sure there is not a single ambitious country who thinks this is nearly good enough." By Rhys Talbot Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

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