-In 2024, ethylene profitability to be low with market structure changing-

In 2023, petrochemical makers, which operate facilities such as naphtha crackers, experienced severe business environment, following 2022. In 2024, new petrochemical facilities would start up and China would less rely on import. The ethylene market is expected to be capped and profitability would remain sluggish. We discuss the petrochemical industry and the surrounding environment.

1. China strengthening petrochemical and final product industry
In China, large-scale ethylene facilities are planned to start up in 2024 as well. Tianjin Nangang, a joint venture of Sinopec and INEOS, plans to set up 1.20 mil mt/year ethylene facility. After the start up, Tianjin Nangang is said to demolish its 200,000 mt/year ethylene facility. ExxonMobil is constructing a 1.60 mil mt/year ethylene facility. Wanhua Chemical, which is already operating existing facilities, is constructing another 1.20 mil mt/year ethylene facility.

In China, many large-scale ethylene facilities are going to be built in the second half of 2020's. Some of these facilities are already approved and more petrochemical products would be domestically produced. Some export makers might lose customers depending on products.

Further, China is enhancing its presence for a variety of products. For example, in the automobile industry, which uses a number of petrochemical products, Chinese makers are picking up the pace of exporting new energy cars as well as selling in the domestic market. Chinese petrochemical products are expanding share of petrochemical products to be used for making cars.

2. Structure reform inevitable for petrochemical makers
Asian countries were exporting many products to China but the sales have been decreasing as China strengthened the petrochemical and final product industry.
Under this situation, Japanese petrochemical makers are further restructuring business. Mitsubishi Chemical decided to carve out its petrochemical and carbon business on the management policy released in December 2021. Mitsui Chemicals mentioned the optimization and restructuring of its naphtha crackers' capacity at a briefing for its investors in November 2023. Sumitomo Chemical established a dedicated team to reform structure in December 2023. Outside Japan, Britain's Shell is considering sales of its refining and petrochemical complex in Singapore. In South Korea, LG Chem is reportedly contemplating sales of its naphtha cracker that started up in 2021. Business restructuring would likely be carried out depending on a change in supply/demand structure in 2024.

3. Differentiation in environmental issues to be key

Outside China as well, many new petrochemical facilities are planned to start up. Saudi Aramco developed Crude-oil-to-chemicals (COTC) process in-house. This process lowered costs to produce petrochemical products compared with using naphtha and realized to save energy. In South Korea and Saudi Arabia, facilities using this technique are constructed. In Japan, waste plastic oil and biomass naphtha are widely used. Investment based on dealing with global environmental issues is becoming more important.