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EPCA Seminar: Olefins Outlook9 October 2020
James Wilson, Senior Analyst
Demand impact for 2020 and outlook
Agenda
01
Changes to global competitiveness
02
03
2
Supply additions: where, when and what are the impacts
Entering 2020 | Expectations of a “tumultuous year”
Source: ICIS Analytics
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Jul-10
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Jul-17
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l-1
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l-1
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Jan-2
0
EU
R/t
on
ne
Indicative European Variable Margin (Ethylene ex Naphtha - Spot) Trendline
40
60
80
100
120
140
160
180
200
Mill
ion
to
nn
es
40
60
80
100
120
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160
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Mill
ion
to
nn
es
Olefin Demand | Real term demand loss
Source: ICIS Supply & Demand Database
Global Ethylene Demand (2000-2025) Global Propylene Demand (2000-2025)
Ethylene Supply | Large scale additions ongoing
Source: ICIS Supply & Demand Database
-2
0
2
4
6
8
10
12
14
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
MM
TP
A
Incremental Ethylene Capacity Additions by Region
NORTH AMERICA NORTH EAST ASIA ASIA AND PACIFIC MIDDLE EAST REST OF WORLD
72%
74%
76%
78%
80%
82%
84%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Operating Rates | Expected to remain depressed in the medium term
Source: ICIS Supply & Demand Database
80%
81%
82%
83%
84%
85%
86%
87%
88%
89%
90%
91%
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Global Ethylene Operating Rate Global Propylene Operating Rate
-1
0
1
2
3
4
5
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9
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
MM
TP
A
Incremental Propylene Capacity Additions by Route
STEAM-CRACKING REFINERY GAS PROPANE METATHESIS MTO/CTO OTHERS
Propylene Supply | Steam cracking driving capacity increase
Source: ICIS Supply & Demand Database
Ethylene Cost Curve | Multi-year period of relative stability
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0 20 40 60 80 100 120 140 160 180 200
Eth
yle
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Cost o
f P
rod
uctio
n (
US
D/to
nn
e)
Cumulative Ethylene Capacity (Million tonnes)
Jan-17 (55 USD/bbl) Oct-18 (81 USD/bbl) Jan-20 (64 USD/bbl)Source: ICIS Analytics
0
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Eth
yle
ne
Cost o
f P
rod
uctio
n (
US
D/to
nn
e)
Jan-20 (64 USD/bbl)
Ethylene Cost Curve | Regional breakdown
North America Middle East Europe SE Asia NE Asia Other
Cost curve for January 2020
Source: ICIS Analytics
Ethylene Cost of Production
Source: ICIS Analytics
-200
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3-J
an-2
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-Jan-2
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-Jan-2
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-Jan-2
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31
-Jan-2
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07
-Feb-2
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-Feb-2
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-Fe
b-2
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-Feb-2
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-Mar-
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-Mar-
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-Mar-
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27
-Mar-
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03
-Apr-
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-Apr-
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-Apr-
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-Apr-
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01
-May-2
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-May-2
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-May-2
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-May-2
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-Ma
y-2
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05
-Jun-2
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-Jun-2
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-Jun-2
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26
-Jun-2
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03
-Jul-20
10
-Jul-20
17
-Jul-20
24
-Jul-20
31
-Jul-20
07
-Aug-2
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14
-Aug-2
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21
-Aug-2
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28
-Aug-2
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04
-Sep-2
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11
-Sep-2
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18
-Sep-2
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25
-Sep-2
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02
-Oct-
20
Cost
of P
roduction (
US
D/tonne)
North West Europe Naphtha North East Asia Naphtha USG Ethane North East Asia MTO
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0 20 40 60 80 100 120 140 160 180 200
Eth
yle
ne
Cost o
f P
rod
uctio
n (
US
D/to
nn
e)
Cumulative Ethylene Capacity (Million tonnes)
Jan-20 (64 USD/bbl) Apr-20 (20 USD/bbl) Oct-20 (42 USD/bbl)
Ethylene Cost Curve | European producers move to the right
Source: ICIS AnalyticsΔ European producers
Conclusions
• Real term demand loss has occurred, with current estimates showing between one and
two years of lost growth for ethylene and propylene respectively
• Olefin demand has not fallen as much as GDP alone might imply, effects have not
been spread evenly between industry sectors and regions, understanding end markets
remains key
• While some projects have seen delays, those with steel in the ground are proceeding, and
we expect to see length increasing through 2021
• Operating rates have seen significant decreases in 2020 and are expected to remain
low through much of the decade, capacity rationalisation will be one factor in determining
the rate of bounce back
• Global competitiveness between olefin producers has increased in a low oil price
environment, reducing the advantage for producers at the low end of the cost curve and
those who might be export focussed
