The balance between supply and demand in the international market for basic chemicals has been broken

China Coatings Network
: Before the global financial crisis, the basic chemicals market supply and demand balance, but with the financial crisis occurred, some markets demand has shrunk. At the same time, new capacity in some areas has been put into operation, resulting in an oversupply of these major underlying chemicals. "The methanol market is performing well, with methanol overcapacity now exceeding 50 per cent globally," Mr Elamo said. This means methanol producers are struggling with a sharp drop in capacity utilization and low profitability.
IHS Chemical predicts that global methanol overcapacity will fall to 40 per cent in 2016, but will climb again to more than 50 per cent by 2020. Before 2008, the global ethylene overcapacity rate was below 5%, and by 2008, the excess rate had reached nearly 15%, affected by the financial crisis, but then the excess rate began to decline. The ethylene overcapacity rate has now fallen below 10 per cent and is expected to remain low until 2020. In 2007, global propylene supply and demand were balanced, with no excess, but by now the excess rate is close to 10 per cent, and although it will increase by 2020, it is likely to remain at more than 10 per cent. The global chlorine overcapacity rate is now more than 20 per cent, but will decline steadily over the next few years and to about 5 per cent by 2020.
Elamo said the prices of ethylene and chlorine could rise sharply by 2020 among the six main underlying chemicals because of the low overcapacity rate of the two products, which would be particularly tight in the event of supply disruptions or higher-than-expected demand growth.
Recently, at the 2015 IHS Global Petrochemical Conference in Galveston, Texas, IHS Chemical Vice President Mark Ellamo said, "The global market for underlying chemicals is at risk of gradual overcapacity, or even serious overcapacity, due to the impact of faster capacity growth than demand." Adjusting capacity investment to match capacity growth to demand growth determines whether the market will be caught in a serious overcapacity dilemma. This will have a direct impact on the profitability of the entire underlying chemicals industry. Mr
said the world's demand for major underlying chemicals had grown significantly since the 2008 financial crisis, but at the same time capacity was growing faster and the market was already oversupply. This will reshape the profitability of global production of underlying chemicals, with vinyl and vinyl products profitable and methanol facing challenges.
2010-2020, the world will add 231 million tons/year of basic chemical production capacity, with an average annual growth rate of 4%, mr. Elamo said. For the three main underlying chemicals, ethylene, propylene and methanol, capacity growth will be stronger after 2015, while growth in xylene and benzene will slow. He noted that major producers of light olefins and methanol were looking to invest in low-cost countries.
IHS Chemical predicts that demand for methanol, ethylene, propylene, benzene, xylene and chlorine, the world's six leading underlying chemicals, will grow rapidly. Among them, methanol demand growth is the fastest. The average annual growth rate from 2010 to 2020 will reach nearly 7%, with an average annual increase of 4.8 million tons. The average annual growth rate of ethylene demand is 3.5%, adding 5.6 million tons of demand per year. That means nearly 60 million tonnes of ethylene and nearly 50m tonnes of methanol by 2020, Mr Elamo said. IHS Chemical forecasts that propylene demand will increase by 48 million tons/year, with an average annual growth rate of 4.2%; Chlorine demand will increase by 28 million tons/year at an average annual growth rate of 3.6%; Demand for xylene will increase by 19 million tons/year at an average annual growth rate of 4.5%; Demand for benzene will increase by 15 million tonnes/year at an average annual growth rate of 2.3%.
, but while demand is growing faster, capacity is growing faster than demand is growing. North America, China and the Middle East are leading the rapid growth of global production capacity for basic chemicals. North America, in particular, is seeing strong growth in underlying chemical production capacity in the region, spurred by the shale gas boom. The global methanol production capacity is expected to exceed 50 million tons/year during the forecast period, with more than 17 million tons/year of methanol capacity expected to be added in North America. The new capacity will be more than six times the current production of methanol in North America, which will return North America to the ranks of the world's largest methanol producers. In addition, ethylene production capacity in North America is growing rapidly. Jim Fitterling, Dow Chemical's executive vice president for raw materials, performance plastics and supply chains, said six new ethylene cracking units will be launched in the U.S. between 2017 and 2019. Dow Chemical is one of several chemical giants that are expanding ethylene production with new projects using cheap ethane raw materials in North America. Other companies planning to build fracking plants include Axiall, Chevron Phillips Chemical, ExxonMobil Chemical, Taiwan Plastics, Shell Chemical, Occidental/Mexichem, Odebrecht, Xin Yue Chemical, and others.