This is a key finding of recent study conducted jointly by Chemical Market Associates Inc. (CMAI) and Purvin & Gertz Inc., which offers an in-depth analysis of petrochemical supply and demand for 1995-2015. The study compares the medium-term outlook-recent forecasts of 1996-2005 petrochemical and feedstock demand-with that of a similar 1996 study conducted by the two firms.
The study compares actual data through 1995, a time when no Asian crisis was apparent, with actual data through 1997, when the financial crisis in Asia was becoming evident.
According to this year's study, the growth of worldwide demand for the base petrochemicals ethylene, propylene, benzene, and mixed xylenes-collectively referred to as EPBX-is expected to slow by about 1.5% in 1999. This accounts for about 2.6 million tons less petrochemical consumption than was previously expected (see graph, this page).
EPBX supply and demandAs numerous new ethylene plants are brought on stream over the next 3-4 years, operating rates for ethylene production facilities worldwide will fall to about 85%, according to the study. After a 5-year period, however, the new capacity created will be absorbed by growth in global demand for ethylene.
If these upcoming projects are delayed or canceled, some improvement could be seen in operating rates during the forecast period.
Additional propylene capacity-about 53 million tons/year-will be required during 2002-15, according to the study. Propylene operating rates above 85% are not a common occurrence, because of the byproduct nature of its supply. Based on analysis of required fluid catalytic cracking capacity for gasoline demand, according to the study, propylene will be available from refineries in sufficient quantities.
For benzene, little growth in demand is expected for 1997-99. When the Asian market becomes stable, said the study, the demand for benzene is expected to increase at the rate of 1.25-1.5 times the worldwide GDP growth rate. Later in the forecast period, growth in demand for benzene will then more closely equal GDP growth.
The long-term forecast for xylene demand growth is about 5-6%/year. And, although there will be no long-lasting effects of the Asian economic crisis on the demand for mixed xylenes following recovery, this projected rate is slightly lower than the historical rate of 8%/year. Growth in xylene demand, even for such a mature market, continues to flourish due to improved polyesters, such as polytrimethylene terephthalate (PTT) and polybutylene terephthalate (PBT), penetrating new markets.
Overall, the worldwide impact of the Asian crisis on EPBX demand will be lessened by the strength of other markets. CMAI estimates that 1999 will be the worst year. Essentially, "short-term pain will translate into longer-term gain for petrochemical companies strong enough to endure the storm," said CMAI.
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