View all newsletters
Receive our newsletter - data, insights and analysis delivered to you
  1. Comment
May 21, 2020

Covid-19 shock decimates demand growth for major petrochemicals in 2020

By GlobalData Energy

The global Covid-19 pandemic originated in the Chinese city of Wuhan in December 2019. It has spread at an alarming rate across the world, surpassing 4.3 million cases worldwide and causing major disruption to the global economy.

The Covid-19 transmission turned Europe to the epicentre of the pandemic by mid-March, with Spain, the UK and Italy becoming the most-affected countries in the region. Later, the US leapfrogged, surpassing all countries and has been the worst-affected country in the world, accounting for approximately one-third of the total Covid-19 cases worldwide. Authorities around the world have responded by implementing strict lockdown measures and imposing restrictions on travel.

With the impact of Covid-19 outbreak globally and the downturn in oil and gas market prices, companies are announcing project delays. The US has the largest number of project delay announcements to date followed by China. Construction works at Shell Beaver County Complex and utility works at the Formosa St James Parish Complex were affected due to the outbreak. Sinopec-SK Wuhan complex’s start-up was scheduled for Q2 2020 but has been postponed to Q1 2021. Another Ethylene and derivatives plant of Sinopec Hainan Refining & Chemical experienced delays in construction works due to the outbreak.

Prevailing uncertainties and economic slowdown due to the outbreak is prompting more similar announcements.

Global key countries’ under-construction capacity 2020-2030

Disrupted supply chains and labour availability across the world are likely to affect the under-construction / commissioning projects. The Covid-19 lockdown and prolonged disruptions has stalled under-construction activities across regions and is likely to result in project delays and stretch timelines beyond projections.

Investments, which are under early stages of development, and projects, targeting FIDs in 2020, foresee postponement as the current situation intensifies and uncertainty in market growth continues. Companies are creating new investment strategies on new projects, which could possibly defer their FID plans. FIDs of PTTGC’s ethane cracker project in Belmont County and CP Chem project in Orange County in the US have been deferred as companies are closely monitoring economic developments. These pre-FID projects are also at risk amid oversupply concerns and oil price crash.

Most of the global economies had to follow lockdown measures introduced by the government, leading to a severe demand crunch in 2020. The impact of Covid-19 crisis on petrochemicals industry varies across the value chain with major end-use segments like automotive and construction taking a hit. However, demand from packaging and medical applications are helping the industry stay afloat. The demand growth of key end-use petrochemicals is expected to recover sharply in 2021 as a rebound in global economic activity is foreseen, following a drastic dip in 2020.

Related Companies

Related Report
NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The top stories of the day delivered to you every weekday. A weekly roundup of the latest news and analysis, sent every Friday. The industry's most comprehensive news and information delivered every month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy
SUBSCRIBED

THANK YOU

Thank you for subscribing to Offshore Technology