China and the US continue to drive ethylene demand post Covid-19

7 August 2020 (Last Updated August 7th, 2020 15:31)
China and the US continue to drive ethylene demand post Covid-19

The Covid-19 pandemic has dented growth of major sectors of the economy, thus affecting the ethylene demand growth in the short-term. However, regions like Asia are largely concentrated with ethylene capacity additions, mainly in China, as the country is targeting self-sufficiency to meet its existing and growing ethylene demand. It is followed by the US, Iran and India. Most of the capacity additions are expected to occur in regions with feedstock advantage, like the US and Middle East and the current or growing demand centres, like China, India, and other Asian economies.

Ethylene, one of the largest produced petrochemicals, has shown a robust and consistent growth, and is expected to grow at a healthy 2.2% compounded annual growth rate (CAGR) over the decade. Asia has been the largest contributor both in terms of demand and supply. It is likely to continue its dominance due to demand from packaging, construction and electrical industry in growing countries such as China, South Korea and India in the region. Demand growth in North America and the Middle East is mainly due to increasing ethylene derivatives production, as ethylene is the basic raw material and is with limited trade. These regions capitalise on superior ethylene cost- competitiveness due to feedstock advantage.

Polyethylene dominates ethylene demand and remains the steady contributor at nearly two-third of total global ethylene demand. Demand from packaging, construction and electrical industry from countries like China and India, is the main contributor. On the other hand, ethylene oxide demand can weaken significantly due to policy and consumer efforts towards less packaging and more recycling, moderating virgin PET demand.

Though the pandemic has affected under-construction activities for many of the projects, companies have revised start-ups of their projects and continue to focus on their growth projects. Companies are closely monitoring economic developments and are likely to align their investment strategies with the market trends. Companies are expected to reduce capital and operational expenditure, in response to the decreased demand and dip in crude prices caused by the Covid-19 pandemic.

Companies would continue to closely monitor changes, assess operations and are likely to restructure their business activities accordingly.