Chemicals Outlook 2020
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Global Chemicals Outlook 2020 GLOBAL OUTLOOK 2020 After an eventful 2019 featuring a global manufacturing downturn, major supply disruptions in chemicals and energy, government policy changes, increased momentum in plastics recycling, and both escalation and de-escalation in the US- China trade war, 2020 will be a pivotal year for the global petrochemical sector. The overall manufacturing outlook remains challenging, but a phase one US-China trade deal and the start of a de-escalation in trade tensions between the world’s No 1 and No 2 economies could boost confidence, trade flows and investment. The global petrochemical sector is also grappling with overcapacity in key areas such as ethylene and derivatives - polyethylene (PE) in particular. See the ICIS outlook for key product chains amid the challenging but stabilising macroeconomic backdrop. v GLOBAL OUTLOOK 2020 – AMERICAS As supply outweighs demand, what pressure will US benzene face? Refinery rates have remained healthy as refiners prepare for the 2020 International Maritime Organisation (IMO) regulations on bunker fuels, which will require ship operators to shift to fuels with lower sulphur content. This has increased benzene supply as a byproduct of increased gasoline production. Refineries account for around 60% of US benzene production. US benzene will Steam crackers are another key source of benzene likely face pressure production, accounting for around 20% of total US in 2020 due to production. The US is in the midst of building a large length in supply and wave of new steam crackers, which are mostly slow downstream designed to use light feedstocks such as ethane. demand. By Tarun Raizada Using light feedstocks causes a significant drop-off in benzene and other aromatics co-produced per unit of ethylene. South Korea exported 842,732 tonnes of benzene to the US during January-November 2019, compared to Refineries 607,355 tonnes during the same time period in 2018, account for according to the ICIS Supply and Demand Database. around 60% Asian imports into the US could ease if aromatics production is curtailed in the region, as an increase of US benzene in benzene capacity is expected to outweigh production 60% derivative demand. Benzene production will nevertheless expand with the large volume of new “There may be some seasonal ethylene capacity coming online. restocking in early 2020, but this Imports from Asia will also continue to impact the US could have a more limited effect” market, despite the arbitrage window from South Rob Peacock, ICIS aromatics analyst Korea to the US being closed, as supply from new units weighs on the region. US BENZENE PRICE HISTORY 3.2 n Benzene DDP USG Spot n Benzene FOB USG Contract 2.9 2.6 $/gal 2.3 2.0 1.7 Jan 19 Mar 19 Apr 19 Jun 19 Aug 19 Oct 19 Nov 19 Source: ICIS back to contents ➔ z GLOBAL OUTLOOK 2020 – AMERICAS ICIS Supply & Demand Database Stay vigilant of situations like this year’s outlook for benzene’s supply and demand imbalance. Anticipate how global petrochemical markets will evolve and be ready to optimize opportunities in 2020. ➔ ENHANCE YOUR STRATEGY HERE Meanwhile, the low season and a global economic have notably exerted downward pressure on US slowdown has hurt domestic demand for benzene, with production from toluene downstream products. disproportionation (TDP) units constrained due to weak margins. “The US-China trade dispute and generally weak expectations in many downstream markets are TDP units convert toluene into benzene and mixed likely to weigh on market sentiment into 2020. xylenes (MX). Selective toluene disproportionation (STDP) units convert toluene into benzene and a paraxylene-rich stream of MX. Key impacts to the US benzene market Higher benzene prices and lower toluene prices • 2020 IMO regulations should improve margins for on-purpose benzene. Benzene has faced pressure from firm crude values, • New wave of steam crackers while toluene supply has lengthened as demand from • Imports from Asia the gasoline blending sector is lower after the end of the peak driving season. There may be some seasonal restocking in early Benzene is used to produce a number of 2020, but this could have a more limited effect than intermediates that are used to create polymers, in the past couple of years due to ongoing length in solvents and detergents. the global markets,” according to Rob Peacock, ICIS aromatics analyst. Major producers of US benzene include ExxonMobil, Marathon Petroleum, Shell, Flint Hills Resources, These bearish supply and demand fundamentals Chevron, CITGO, LyondellBasell, Valero and Total. n BENZENE-TOLUENE SPREAD 80 n Current-month US spot benzene - US spot toluene 60 40 20 0 Cents/gal -20 -40 -60 -80 Jan 19 Apr 19 Jul 19 Sep 19 Nov 19 Source: ICIS back to contents ➔ vv GLOBAL OUTLOOK 2020 – AMERICAS Little optimism for 2020 as US styrene faces headwinds Prices in late 2019 were soft, with spot export down for two weeks and the other for 30 days. prices at multi-year lows and domestic contracts at their lowest since June 2016. The plant’s ethylbenzene (EB) unit will also be down for 30 days. US styrene prices tend to firm in the first quarter, as has occurred over the past three years, INEOS Styrolution is likely to have a turnaround at according to ICIS price history. its 770,000 tonne/year plant at Bayport, Texas, But it remains to be seen if that will be the case in the first half of the in 2020. As the US styrene year, although this has market enters 2020 not been confirmed. The US-China trade war is likely to continue with headwinds weighing on sentiment, but economists expect the from a global The company last US economy to continue to expand, albeit at a manufacturing conducted slower rate than hoped for. slowdown and maintenance at the Supply could persistently soft plant in the first tighten in the GDP growth will slow from 2.9% in 2018 to 2.3% derivative demand, quarter of 2018. this year and 1.8% in 2020, according to the latest market participants first quarter economists’ survey by the National Association for are not optimistic The combined for the coming year. on planned Business Economics (NABE). capacity of the two By Adam Yanelli plants is almost turnarounds Supply tighter in 2020 30% of total North scheduled Supply could tighten in the first quarter on American capacity, planned turnarounds scheduled in 2020. according to the in 2020 ICIS Supply and Demand Database. Demand softens US styrene prices tend to firm The US styrene market has been pressured by soft derivative demand, especially from polystyrene in the first quarter, according (PS), which is in its traditional slow period in the fourth quarter but has seen lacklustre demand for to ICIS price history much of 2019. Demand for PS and other industrial raw materials has also been pressured by a global manufacturing US producer AmSty will begin a planned slowdown, which has lowered consumption rates. 30-day turnaround at the end of January, with one of its styrene lines US styrene exports surged in 2019 and are back to contents ➔ z GLOBAL OUTLOOK 2020 – AMERICAS expected to continue in 2020. Refinery rates have remained healthy as refiners prepare for the impending 2020 For example, US October exports rose by 11% year International Maritime Organisation on year and are up by 42% year to date. (IMO) regulations on bunker fuels, which US styrene has increased benzene supply as a byproduct Much of the material has found its way to Europe. of increased gasoline production. Refineries exports account for around 60% of US benzene Exports to The Netherlands have more than surged production. doubled in 2019, with material shipped to the country at the second highest volume after in 2019 Styrene is a chemical used to make latex and Mexico. Exports to Belgium are almost nine times and are polystyrene resins, which in turn are used to higher than in 2018. make plastic packaging, disposable cups and expected insulation. Benzene length remains Styrene takes most of its pricing direction from to continue North American styrene producers include AmSty, upstream benzene, which will likely face downward in 2020 INEOS Styrolution, LyondellBasell Chemical, pressure in 2020 due to length in supply and slow Pemex, Shell Chemicals Canada, Total downstream demand. Petrochemicals and Westlake Styrene. n US STYRENE PRICE HISTORY US STYRENE EXPORTS n 0.50 62 2019 n Styrene FOB US Contract n 2018 n Styrene FOB US Spot 0.46 60 1,454 2018 2,064 58 0.42 Year to date 2019 Year to date $/lb 0.38 56 Cents/lb 210 ‘000 tonnes 200 0.34 54 190 180 170 52 0.30 160 Jan 19 Ap 19 Jun 19 Aug 19 Oct 19 Oct 18 Sep 19 Oct 19 Source: ICIS Source: ICIS back to contents ➔ GLOBAL OUTLOOK 2020 – AMERICAS Will increasing consumption bring balance back into the Acetone market? “I think you’ll see some improvement, but it’s difficult to know when,” a market source said. Barge acetone prices tend to follow costs from feedstock refinery-grade propylene (RGP), while truck acetone prices tend to follow supply and demand. The outlook for RGP costs is soft as the feedstock is expected to remain amply-supplied amid strong The US acetone refinery operating rates as new maritime fuel market remained regulations begin in 2020. Low demand for key lengthy heading propylene derivative polypropylene (PP) also is likely into 2020 despite to contribute to RGP length. lower import levels and lower Supply and demand fundamentals remain soft, production, but despite some support from lower import levels and increasing lower production. consumption may bring the Import levels fall market into a Amid the progression of the antidumping duties more balanced position.