The global chemical industry faces downward pressure in 2019

Global Coatings Network News:

The pressure mainly comes from the slowdown in market growth, and it will take some time for the professional transformation of large companies, but it is expected that the profitability will remain at a healthy level.

The shale gas revolution in the United States has brought great raw material advantages to the production of chemical products.
After decades of stagnation, the US chemical industry has recovered and has become a global low-cost chemical production base.
According to data from the American Chemical Industry Council (ACC), since 2010, the United States has announced 333 chemical projects with a total value of US$202.
0 billion.
In 2018, the U.
S.
chemical industry's capital expenditure reached 37 billion U.
S.
dollars.
In 2019, it will increase by 4.
7%, and in 2020 it will increase by 3.
4%.
Early-announced projects are almost complete.

In 2018, the output of US chemicals (excluding pharmaceuticals) increased by 3.
1%, of which the output of basic chemicals increased by 2.
1%, and the output of specialty chemicals increased by 3.
7%.
In 2019, the output of chemicals (excluding pharmaceuticals) will increase by 3.
6%, of which the output of basic chemicals will increase by 4.
8%, and the output of specialty chemicals will increase by 2.
2%.
In 2020, the output of chemicals (excluding pharmaceuticals) will increase by 3.
1%, of which the output of basic chemicals will increase by 4.
3%, and the output of specialty chemicals will increase by 1.
6%.

The rapid growth of chemical production in the United States has resulted in oversupply in the United States, and a large number of chemicals need to be exported.
In 2018, the U.
S.
chemical industry achieved a surplus of 38 billion U.
S.
dollars.
Exports increased by 10% to 143 billion U.
S.
dollars, while imports increased by 7.
8% to 105 billion U.
S.
dollars.
If there is no major trade interruption, the US chemical trade surplus will reach 69 billion US dollars by 2023.
The growth of chemical exports will be the main driving force for the growth of the US chemical industry in the next 10 years, so export market access is crucial.

2.
The number of participants in the Chinese chemical industry market has increased, with mixed feelings

Despite the slowdown in economic growth and a slight decline in the average annual growth rate of chemical product market demand, China is still the world’s largest consumer and producer of chemical products, and a country with a large increase in demand for chemical products.
This trend will continue in the future.
constant.
The supply and demand gap in China's chemical market, especially the ethylene industry chain, has attracted the attention of domestic and foreign investors.
Not only private enterprises and local state-owned enterprises will participate in the domestic ethylene downstream product market competition.
With the relaxation of foreign capital access requirements for petrochemical projects and the removal of joint venture ratio restrictions, foreign capital will also enter.
Petrochemical giants such as BASF and Exxon Mobil have announced that they will be in China.
The sole proprietorship of the construction of ethylene projects, their market positioning is very clear, with low cost and high quality to grab China's market share.
The Sinopec product market will gradually form a multi-subject interactive market pattern of coal chemical industry , private petrochemical enterprises, local petrochemical enterprises, wholly foreign-owned enterprises, and large state-owned enterprises such as PetroChina , Sinopec, CNOOC, and Sinochem.
More intense.

In 2019, Zhejiang Petrochemical and other private capital adopted internationally advanced production technology and control technology, designed and constructed new projects in accordance with internationally advanced energy-saving and emission-reduction standards and put into production, which will have a huge demonstration effect on the development and application of related technologies in China.
It will also promote the improvement of the overall technical level of China's petrochemical industry.
At the same time, foreign investment in China not only bring ExxonMobil crude oil directly to cracking olefins technology, BASF's high-end chemical production technology, advanced technology and high value-added chemical and petrochemical products, and new investment business model, new products and standards Advanced intelligent manufacturing concepts will give Chinese companies a huge demonstration and leading role.

2019 is a period of intensive implementation of China's environmental protection policies, with more stringent regulations, and the pressure on environmental protection in the chemical industry will further increase.
In the short term, companies are facing the pressure of increasing environmental protection costs, which will accelerate the withdrawal of backward small and medium-sized production capacity.
In the long run, it will speed up the development of traditional chemicals toward high-end, cluster, base, and green development, and move toward high-quality development.

3.
The Middle East chemical industry comprehensively promotes globalization and product diversification

The Middle East chemical industry is undergoing profound changes.
As the supply of ethane decreases, the Gulf region has turned to the use of liquid or mixed raw materials to ensure the long-term supply of petrochemical raw materials and the diversification of products.
Statistics show that from 2000 to 2015, the growth rate of chemical production capacity in the Gulf region was second only to China, and its global share increased from 3% to 7%, which has slowed down in recent years.
In the future, chemical production capacity in the Gulf region will continue to grow.
Qatar, Oman, Abu Dhabi, Kuwait and Iraq will also build multiple liquid raw material cracking plants.
In addition, some national oil companies in the Gulf region will also promote downstream investment in overseas projects close to the market or raw materials.
Product differentiation and high-end products are the development direction of the Middle East chemical industry.
The production capacity of high value-added products is expected to increase from 5 million tons/year in 2017 to 6.
4 million tons/year in 2022, a growth rate of 5.
1%.

Saudi Aramco (Aramco) is a company with ambitious downstream investment.
It plans to increase its global chemical production capacity from 12 million tons/year to 34 million tons/year by 2030, becoming an integrated upstream and downstream manufacturer.
The company plans to add a large amount of paraxylene capacity at the Jazan refinery under construction that will be put into operation in 2019 .
At the same time, Aramco and Saudi Basic Industries Corporation (SABIC) are constructing a crude oil-to-chemicals project with an investment of 20 billion U.
S.
dollars in Yanbu, Saudi Arabia, which will produce at least 14 million tons of chemicals each year.
The conversion rate of chemical products was announced earlier.
The increase from 45% to 70% is expected to start production in 2024.

In addition, Aramco is also investing in the construction of a large amount of petrochemical production capacity outside of Saudi Arabia.
For example, it plans to invest US$7 billion in the Rapid Refining and Chemical Integration (Rapid) project of the Malaysian crude oil company (Petronas); and invest nearly 50% in a petrochemical company in Ulsan, South Korea.
100 million U.
S.
dollars; signed a framework agreement with Abu Dhabi National Oil Company (ADNOC) to jointly invest and build a 44 billion U.
S.
dollar refining and chemical integration project in Ratnagiri, India with Indian Petroleum Corporation; also signed a shareholding agreement with China Zhejiang Petrochemical Refining & Chemical Co.
, Ltd.
Integrated project.
MotivaEnterprises, a subsidiary of Aramco, is a U.
S.
refiner that is evaluating the feasibility of investing in ethylene and aromatics in the U.
S.
Gulf Coast region , which marks that Aramco will enter the U.
S.
petrochemical market.

Another major move of the Saudi chemical industry is that Aramco is seeking to use the Saudi public investment fund to purchase 70% of the Saudi chemical giant SABIC after shelving its listing plan indefinitely.
SABIC is the world's second largest chemical company by market capitalization after Dowdupont.
In recent years, its product structure has been continuously adjusted and optimized, and its business covers Europe, America and Asia.
Aramco's move will further promote the globalization and product diversification of the Saudi chemical industry, enable greater development of the Saudi chemical industry, and be conducive to the overall optimization of resources.

Mergers and acquisitions reshape the global industrial landscape

The main driving force of mergers and acquisitions in the chemical industry comes from the company's asset restructuring.
After the company undergoes mergers and acquisitions, it will carry out asset reorganization and divestiture according to the needs of strategic development.
Dow DuPont is a good example.
After the spin-off is completed in 2019, the future DuPont will consist of 4 completely different businesses, or further spin-offs.
LyondellBasell plans to acquire Schulman, a global modified plastics producer, for US$2.
25 billion in February 2018 to further extend its product chain downstream and expand its composite plastics business; in June, it announced that it was cooperating with Odebrecht.
Negotiations to acquire the majority of its shares in Braskem.
This transaction will enable Lyondell Basel to become the world’s largest PP producer and the top five PE producer, with annual sales revenue of US$50 billion Become the third largest chemical company in the world.
For the past two years, Monsanto has also been a representative of an agricultural chemical company and has now become a part of Bayer.
Linde and Praxair will soon merge into one company.
Other larger chemical companies (including Potash, Agrium, Airgas and Valspar) will also merge or be acquired.
In the next 2 to 4 years, reinforcement acquisitions or asset divestitures between large companies will continue, and many diversified chemical companies will begin to focus on their professional transformation.

 A large amount of ethylene production capacity is released, the economic situation is not optimistic, and olefin profits will continue to be squeezed

Since the end of 2017, the U.
S.
has newly commissioned ethylene capacity of about 3 million tons per year.
As production growth has exceeded the growth rate of downstream demand, the domestic market has shown an oversupply situation, and the U.
S.
ethylene spot price has fallen to a 9-year low.
On the other hand, the price of ethane in the United States has doubled in the past year, from 17 cents per gallon to 34 cents per gallon.
Affected by the dual impact of the rising cost of ethane raw materials and the continued decline in ethylene spot prices, US ethylene profits have been severely squeezed.

Compared with 2017, the planned and unplanned shutdowns of ethylene production in Europe decreased in 2018, and the ethylene market supply increased throughout the year.
The price trend is high and low, and fluctuates downward.
The annual average price is slightly higher than that in 2017, but the increase is much lower than that of cracking raw materials such as naphtha and ethane.
Therefore, European ethylene profits are also squeezed to a certain extent.
Pressure, but still considerable.

The overall trend of ethylene prices in Northeast Asia is similar to that in Europe, and the annual average price is higher than in 2017.
However, the cost of ethylene production in Northeast Asia is higher than that in Europe.
This is mainly because the crackers in Northeast Asia are mainly liquid raw materials such as naphtha, which are greatly affected by the increase in crude oil prices.
At the same time, the cost of coal ( methanol ) to ethylene in China is increasing.
Under the background of low-to-medium oil prices, it is also relatively high; while some cracking raw materials in Europe use relatively inexpensive North American ethane, which has a cost advantage.
Therefore, the profit of ethylene in Northeast Asia is lower than the previous year.

Overall, in 2018, with the commissioning of new olefin production capacity, rising crude oil prices and weak downstream demand, global olefin profits have been squeezed to a certain extent, but they are still at a relatively good level.
In 2019, low and medium oil prices will continue to bring cost advantages to the development of the petrochemical industry.
However, the massive release of global ethylene production capacity and the unoptimistic trend of the economic situation will cause olefin profits to continue to decline, but it is still in the business cycle.