The European petrochemical industry is still struggling this winter

This autumn, the European petrochemical industry faced serious uncertainty
due to a combination of factors such as the energy crisis, persistent logistics constraints and weak petrochemical demand in the context of persistent inflation.
At present, despite falling energy prices and easing logistics problems, the European petrochemical industry is still suffering from the high cost of natural gas and electricity, and demand for petrochemicals is getting sluggish, and the industry crisis is still difficult to overcome
this winter.
For this reason, the European petrochemical industry is still trying to cope with the current situation
.

The competitiveness of the industry is facing great challenges

In the context of inflation and the energy crisis, the biggest problem facing the European petrochemical industry is the high
cost.
The problem has intensified since this summer
.
High costs lead to less
competitiveness.
However, since 2020, Europe has also faced the impact of international supply chain disruptions and delays, which in turn has protected the European petrochemical industry
to some extent.
S&P Global said that due to global logistics and supply chain challenges, even though petrochemical capacity in Asia, the Middle East and the United States has increased in the past three years, the three major regions have not competed
much with European petrochemical producers in the European market.

However, after this autumn, Europe's logistics problems showed signs of easing, and the European petrochemical industry began to worry about the arbitrage of
Asian and American petrochemicals to Europe.
Joshua Forber, a petrochemicals analyst at S&P Global, said this could eventually lead to some marginal petrochemical capacity in Europe being shut down
for the rest of 2022 and into 2023.
"After a steady increase in global capacity over the past three years, European and global petrochemical producers will face increased competition
in the next 18 months," Forber said.
”

The European petrochemical industry has no cost advantage over its external counterparts, and the energy crisis has exacerbated this problem
.
European petrochemical market margins collapsed in August, with naphtha-based ethylene cracking margins falling sharply to negative territory at the end of the month
, according to the S&P Global Commodities Briefing.
High gas prices in Europe will continue to weigh on margins across the ammonia and vinyl chloride value chain, with propane dehydrogenation margins in Europe also falling to zero
in mid-August.
Rob Ingram, CEO of INEOS Olefins & Polymers Europe, said that the long-term competitiveness problems faced by the European petrochemical industry are being exacerbated
by the energy crisis due to the lack of superior raw materials.

For the European chemical industry, which cannot remain competitive in the current situation, there may be no alternative to shutting down capacity, especially in sub-sectors
with high demand for natural gas.
S&P Global's latest short-term European gas analysis shows that of Europe's total capacity of approximately 19 million mt/year of synthetic ammonia, 12 million mt/year has been partially or completely discontinued
.

Natural gas remains key to the crisis

The shortage of natural gas resources is a competitive disadvantage for the European petrochemical industry and the key to the
current crisis.

At present, the price of natural gas in Europe has fallen sharply, but the total supply is still limited
.
As of November 21, the Dutch TTF futures price was 116.
13 euros/kWh, but for the industrial sector, this price is still high and cannot be used
in volume.
Although some producers have resumed production of natural gas feedstock products, these production remains limited
overall.

For now, European petrochemical producers are still operating
with limited gas supplies.
According to Alfred Stern, CEO of the Austrian Oil & Gas Group (OMV), OMV has made "good progress"
in securing the operation of its main European refining and petrochemical production sites with limited gas supplies.
On the one hand, the company focuses on ensuring social gas demand; On the other hand, over the past few months, OMV has actively taken various measures to minimize the impact of
reduced Russian gas supplies.
"Our crackers in Austria and Germany are supplied with naphtha feedstock, while our crackers in Sweden's Strunsund and Finland's Porvoo can use naphtha, butane, ethane, propane or LPG mixtures
," Stern said.
”

Jim Fitling, CEO of Dow Chemical Co.
, said some of Dow's petrochemical plants in Europe have reduced their use of natural gas
.
"Considering that the German government is likely to take some gas cuts in the winter, we have to prepare
for the fourth quarter," he said.
Fitlin said the company has adjusted its cracker plants in Tarragona, Spain, and Tellenewsen, the Netherlands, for flexible feeding
.
Peter Vanak, CEO of LyondellBasel, also said that LyondellBassel is also suffering from a severe shortage of natural gas
.
The company's integrated cracker is less dependent on natural gas and mainly uses naphtha feedstock
.
The company can operate ethylene cracker plants in Europe and maintain a high load rate
of more than 85%.

Technological superiority is also needed to resolve the crisis

Many petrochemical practitioners in Europe believe that the European petrochemical industry can make full use of technological advantages and actively promote the sustainable development of
the industry.

Ingram said the European petrochemical industry would embark on a "positive path"
by investing in process technology, efficiency and digitalization.
He believes that Europe's chemical production efficiency has always been higher than that of other regions
.
In this crisis, the European petrochemical industry has the opportunity to convert its steam crackers to sustainable plants using renewable energy and
feedstocks.
In September, BASF, SABIC and Linde started construction of the world's first large-scale electrically heated steam cracker demonstration plant
.
Using renewable energy to generate electricity, the new technology can reduce CO2 emissions from the steam cracking process by 90%
compared to technologies commonly used today.

However, Ineos estimates that to fully convert a single cracker to green energy and feedstock, it will take twice the size of Belgium to install enough wind turbines and grow biomass feedstock crops
necessary for production.
Ingram said: "Converting ethylene cracking feedstock to renewable energy is a difficult task
.
”