October 19, 2018
The Study Group on Global Supply and Demand Trends for Petrochemical Products has been organized by the Ministry of Economy, Trade and Industry (METI) with the mission of properly surveying and analyzing domestic and overseas supply and demand trends for petrochemical products within the changing circumstances surrounding the Japanese petrochemical industry.
METI hereby announces that the study group has completed a study on trends for the period from 2009 to 2016 and produced a forecast for the period from 2017 to 2022 concerning global supply and demand for petrochemical products, such as ethylene derivatives, propylene derivatives, and aromatic products (demand, production capacity and volume).
1. Global Demand for Petrochemical Products in 2016 and Forecast for 2017 to 2022
- Global demand for ethylene derivatives (ethylene equivalent) in 2016 steadily increased by 3.8% from the previous year to reach 142.3 million tons while prices of crude oil and petroleum products continued fluctuating.
- Regarding the forecast for 2017 to 2022, global demand (ethylene equivalent) is estimated to reach 177.3 million tons in 2022 (up by 35.0 million tons from 2016), with the estimated average annual growth rate being 3.7% for the period from 2017 to 2022.
2. Features by Region
(1) Demand expansion in Asia
- Demand for petrochemical products (ethylene equivalent) in Asia as a whole is estimated to expand continuously although the average annual growth rate is expected to decrease from 5.6% for the period from 2009 to 2016 to 4.8% for the period from 2017 to 2022. In 2022, demand in Asia is expected to account for over 50% of total global demand.
- Trends of new coal chemical projects in China
New coal chemical projects for MTO (methanol to olefin) and CTO (coal to olefin) in China have been affected by review of initial plans as a result of enhanced environment controls in China and increased costs for methanol that has reduced its comparative superiority over crude oil.
The 13th Five-Year Plan stipulates the consolidation of naphtha cracking facilities in seven regions and the construction of new plants. Therefore, China's production capacity of ethylene is expected to increase to 31.9 million tons in 2022 from 22.7 million tons in 2016. Plants to be newly constructed include the first ethane cracker in China.
- Continued growth in domestic demand in India
Backed by a high GDP growth rate, demand for petrochemical products (ethylene equivalent) in India is expected to grow steadily and the average annual growth rate for 2017 to 2022 is estimated to be 4.2%. India will continuously depend on imports for some products despite efforts being made to actively construct new facilities to respond to growing demand.
- Current status and forecast for Japan
The Japanese petrochemical industry has been responding to steady domestic demand and ethylene plants are operating at high capacity due to increases in ethylene-naphtha spread and favorable export to Asia of derivatives and basic chemicals. However, average annual growth rates are expected to decrease for the period from 2017 to 2022, compared with the period from 2009 to 2016, from 1.1% to -0.6% for ethylene equivalent demand and from 2.3% to 0.4% for propylene equivalent demand.
(2) Large plants to produce ethylene derived from shale gas operations that are beginning full operation in the United States
- The economy of the United States is clearly recovering and the petrochemical industry shows strengths both in supply and demand backed by large-scale tax break and infrastructure investment. The average annual growth rate of ethylene equivalent demand for 2017 to 2022 is estimated to increase to 2.7% from 2.4% for the period from 2009 to 2016.
- Projects for new and additional facilities to produce ethylene derived from shale gas are expected to be affected by rising construction costs. However, shale gas still has an absolute price advantage over naphtha.
- From 2017 to mid-2018, a total of three 1.5 million-ton-level ethane crackers started operations to produce ethane derived from shale gas. Backed by affluent resources in the country and continuously increasing global demand for petrochemical products, large plants are accelerating commencement of operation and plans to construct new plants continue to be publicized. In this manner, the 2nd and 3rd waves of the shale gas revolution are expected to emerge into the future.
- Petrochemical products derived from shale gas are now mainly exported to Europe. However, further development of large-scale shipment facilities will expand exports to India and other Asian countries in addition to Europe and Latin America, where ethane, LPG and petrochemical products (including ethane derivatives) are already broadly utilized. Changes in their supply-demand balance may affect market conditions in the respective regions.
(3) Business expansion to downstream industries in the Middle East
- The petrochemical industry in the Middle East has been advancing efforts to expand business to downstream industries to acquire domestic demand, realize globalization and create high-value-added products. The average annual growth rates for 2017 to 2022 are estimated to be 4.2% for ethylene equivalent demand and 4.7% for propylene equivalent demand.
- However, plans to construct new facilities involve uncertainties due to possible changes in international environmental and diplomatic circumstances.
- Major derivatives have been general-purpose polyethylene and ethylene glycol, but production of high-value-added products is also underway. Additionally, projects with private companies are being carried out jointly and state-owned companies in the Middle East are trying to expand business outside the region and making efforts for globalization.
3. Key points concerning supply-demand balance
- Regarding the supply-demand balance for ethylene derivatives (ethylene equivalent) in China, increases in demand are apparently exceeding outpacing increases in production capacity, with both positive and negative uncertainties, such as reconsideration of existing coal chemical projects and plans to construct naphtha crackers and other new facilities. In 2016, demand exceeded production capacity by 16.00 million tons and the gap is expected to expand to 24.60 million tons in 2022.
- In the Middle East, oversupply is expected to increase from 17.78 million tons in 2016 to 20.74 million tons in 2022 as a result of production capacity increases in Iran and other countries.
- New plants that will produce ethylene derived from shale gas are going to start operation in North America. Therefore, oversupply will increase significantly from 5.70 million tons in 2016 to 11.14 million tons in 2022.
- Regarding the supply-demand balance for propylene derivatives (propylene equivalent) in China, after the excess demand for propylene derivatives decreased rapidly to 0.99 million tons in 2017 thanks to the progress in PDH projects, etc., the excess is expected to increase again to reach 3.10 million tons in 2022.
4. Forecasts for 2025 and 2030
- Global demand forecasts for 2025 and 2030 were also compiled anew (see Data Table by Commodity (ii)).
- Demand for ethylene derivatives (ethylene equivalent) is expected to increase steadily in China, the United States, India and major regions in the Middle East up to 2030. The average annual growth rate for the ten years from 2020 to 2030 is estimated to be around 3.0% for the whole world.
- For demand for propylene derivatives (propylene equivalent) as well, the average annual growth rate for the ten years from 2020 to 2030 is estimated to be around 3.0% for the whole world.
(Note) The survey results were analyzed based on the data available at present and forecasts may differ due to future changes in political situations or other factors.
Division in Charge
Material Industries Division, Manufacturing Industries Bureau