ChemOrbis 2nd PO Event: Lower oil alters olefin market outlook
While noting that WoodMackenzie had predicted a supply-driven oil price decline as early as 2009, albeit not as large as the actually observed price decline, Mr. Lidback went on to predict that WoodMackenzie expects oil prices to return to the $100/barrel threshold within the next three to five years.
Regarding comparative costs for different production processes, Mr. Lidback stated that the advantage for US ethane-based ethylene producers relative to Asian naphtha crackers fell from $800/ton in September 2014 to $230/ton in January 2015 before recovering to around $400/ton in February. Regarding Chinese coal-based capacities, WoodMackenzie stated that ethylene production costs using this route were the highest in the world with oil under $50/barrel whereas this route generated production costs below Asian naphtha based crackers when oil was above $100/barrel.
Touching on planned North America capacity additions, Mr. Lidback said that global ethylene demand will grow by 5-6 million tons/year for the next ten years, enough to absorb 3-4 new world scale ethylene crackers on a yearly basis. The US will need to export around 10-15 million tons/year of ethylene derivatives once new capacities are built while traditional US export destinations in Latin America can only absorb around 5 million tons of extra capacity. Asia is likely to become the primary destination for the additional US capacity.
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