In the coming years, as numerous new petrochemical plants in the Middle East and Asia come online, a surge of products entering the global market is expected to lead to oversupply. This could significantly reduce profitability across the industry and potentially trigger a market downturn around 2010–2011. Faced with global overcapacity, European petrochemical companies are actively seeking ways to strengthen customer relationships, enhance product value, and optimize capacity utilization. However, industry experts remain cautious, noting that many uncertainties still lie ahead.
Analysts predict that approximately 20 million tons per year of new ethylene production capacity will be added in the Middle East before and after 2010, with most of the output destined for Asia, particularly China. At the same time, China is set to add between 6 and 10 million tons per year of new ethylene capacity, which will nearly double its total production to 14–18 million tons annually. Some of these products may also find their way into international markets, reshaping the global petrochemical landscape.
Paul Hodges, president of eChem, a UK-based consulting firm, warned that this influx could slow or even halt the growth of certain ethylene derivative imports in China once the new Middle Eastern crackers start operating. Shell Chemicals estimates that by 2010, China’s self-sufficiency in polyethylene resin will rise from 50% in 2005 to 64–74%, while ethylene glycol self-sufficiency is expected to jump from 20% to 54%. Styrene monomer self-sufficiency could reach 68–87% during the same period.
Colin McKendrick, president of Shell South Sea Petrochemicals, noted that although some new Middle Eastern and global ethylene projects may face delays, supply surpluses and declining operating rates are likely to persist for the next two to three years. Even with China’s high import levels, it may not be able to absorb all the new capacity, leading to increased competition.
The impact on the European petrochemical market may not be as severe as feared. Over the past few years, European producers have focused on improving product quality and strengthening their market position. Many large European firms also have significant operations in the Middle East and Asia, such as Sabic, which entered the European market by acquiring DSM’s petrochemical division and recently acquired Hunts’ business.
For many petrochemical products, including certain polymers, European imports are minimal, and domestic producers maintain a strong market presence. Additionally, European companies are meeting specific customer demands through specialty and custom products.
According to the European Chemical Industry Association, from 2006 to 2008, the annual growth rate of petrochemical products is expected to reach 2%, with specialty chemicals growing at 3% and consumer chemicals at 4%. The pharmaceutical sector is projected to grow at 5.9%, while base inorganics will increase by 1.9%. Petrochemical-derived polymers are expected to grow only by 1.1%, and overall chemical growth (excluding pharmaceuticals) is forecasted at 2.4%.
International players like Borealis and BASF continue to focus on high-value specialty chemicals, driving innovation and transformation in the European petrochemical industry.
Looking ahead, one potential long-term threat to the European sector comes from cheaper coal-based petrochemical products, especially those from China. According to Shell Chemicals, China may build an ethylene plant with up to 20 million tons per year of capacity between 2010 and 2020, mostly using coal as feedstock. By 2020, China plans to invest RMB 100 billion in coal chemical projects, enabling it to export petrochemical products at lower prices than Middle Eastern competitors.
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