The lower crude oil pricing environment that has been in place for almost the last three years has influenced the olefin cost curve around the World. The deviation between advantaged and disadvantaged regions has narrowed, levelling the playing field much more.
At the same time, feedstocks continue to present interesting dynamics, with ethane, coal, LPG, naphtha and methanol all having their own intricate dynamics. The outlook for crude oil pricing is therefore a critical assumption in the global and regional olefins market dynamics, impacting costs, profitability and trade flows of olefins derivatives. This is the major supply side force impacting the market over the next five years.
On the demand side, olefins growth is going to be driven by polyolefins and within this China is expected to be the engine pulling the global market through the next five years. China’s projections for demand are therefore critical to our base case view.
China as a country is also leading the way in terms of technology diversification for olefins production, not least by investments in CTO/MTO (coal-to-olefins/methanol-to-olefins) and PDH (propane dehydrogenation). We see different balances for China in the C2/C3 chains and likely different global trade flows for the major derivatives of polyethylene and polypropylene.
Putting this global puzzle together, our current view reflects greater optimism for the European region in terms of olefins production and overall market direction and growth. Several companies have made recent announcements that reflect optimism in the long-term future of the European petrochemical industry.
In the above video Patrick Kirby, Principal Analyst EMEARC Olefins, looks at the future of the Olefins markets. What is the impact of recent North American investments on Europe? What does the future look like?
Download Patrick’s Olefin Outlook presentation to learn more on the olefin cost curve by completing the form on this page.