European companies actively respond to global overcapacity

In the next few years, as a large number of new petrochemical plants in the Middle East and Asia are put into operation, the products entering the international market will inevitably result in excess supply, and the profitability of the petrochemical industry will be greatly reduced, and the market downturn may occur around 2010 to 2011. In the face of a global overcapacity, European petrochemical companies are actively taking measures to further strengthen cooperation with customers, increase product added value, and rationalize capacity allocation. However, people in the industry believe that, even so, there are still many uncertainties in the future.

Analysts believe that about 20 million tons/year of new ethylene production capacity will be put into operation in the Middle East before and after 2010, and most of the products will be sold to Asia, especially China. On the other hand, during this period, there will be 6 million to 10 million tons/year of new ethylene production capacity in China, which will gradually put into production. This will enable China's ethylene production capacity to almost double, reaching 14 million to 18 million tons/year. Some of these products will also be exported to the international market, thus affecting the global petrochemical market structure.

"This will mean that when many new ethylene crackers in the Middle East begin to be put into use, the growth rate of imports of certain ethylene derivatives in China will slow down or even stop growing altogether," said Paul Hodges, president of eChem, the UK's international consulting firm.

Shell Chemicals estimates that by 2010, the self-sufficiency rate of polyethylene resin in China will increase from 50% in 2005 to 64% to 74% in 2010, and the self-supplied rate of ethylene glycol will increase from 20% in 2005 to 30% in 2010. 54%, the self-sufficient rate of styrene monomer will increase from 35% to 68% to 87%.

Colin McKendrick, president of Shell South Sea Petrochemicals, said that although the production of new ethylene production facilities in the Middle East and other regions will be postponed, the supply surplus and operating rate decline will continue to occur in the next 2 to 3 years. Despite China’s staggering import of petrochemical products, its market will not be able to absorb all new capacity for China.

The impact on the European petrochemical market may not be as serious as expected. In recent years, European petrochemical producers have continuously improved product quality and strengthened their market position in all aspects. In addition, many large petrochemical companies in Europe also have large production capacity in the Middle East and Asia, the largest of which is Sabic. Five years ago, the company entered the European market by purchasing DSM's petrochemical business, and acquired Hunts earlier this year. Mai's petrochemical business.

For petrochemical products including some polymers, European imports will be very small. European domestic petrochemical companies will control most of the market share. In addition, these companies also meet specific customer needs by developing specialty products or custom products.

According to the European Chemical Industry Association, from 2006 to 2008, the annual growth rate of European petrochemical products will reach 2%, the growth rate of specialty chemicals is expected to be 3%, and the average annual growth rate of consumer chemicals is expected to be 4%. The growth rate of the pharmaceutical industry is estimated. At 5.9%, the base inorganics will increase by an average of 1.9%, and the petrochemical derived polymers only increase by 1.1%. The annual growth rate of overall chemicals that do not include drugs is 2.4%. International companies represented by Borealis and BASF will continue to implement high value-added specialty chemical development strategies and accelerate the transformation of the European petrochemical industry.

In the long run, the possible threat to the European petrochemical industry will come from cheaper coal-based petrochemical products, especially China's coal-based petrochemical products. According to Shell Chemical Analysis, from 2010 to 2020, China may build an ethylene plant with a capacity of up to 20 million tons per year, most of which will use coal as raw material. It is said that by 2020, China plans to invest RMB 100 billion to build a coal chemical project. By then, China will be able to export more petrochemical products at lower prices than in the Middle East.

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