BUSINESS
Many Petrochemicals Face Supply Problem The idea of a shortage of major U.S. petrochemicals seems almost absurd considering the low capacity use situation of just a few years ago. But shuttering of capacity in the industry plus increased demand in the U.S. and abroad have made tight supplies of many major petrochemicals a reality. Couple this with the lack of announced plans for new capacity through the rest of this decade and at least spot, if not overall, shortages of some major volume petrochemicals and derivatives are indeed likely if not inevitable. Tightening supply is not confined to major derivatives such as plastics, some of which are already experiencing very high capacity utilization rates and spot shortages in some areas of the U.S. It also is occurring in such large-volume petrochemicals as ethylene. Earlier this month, William L. Wishlinski, vice president of chemicals sales at Amoco, told the De Witt Petrochemical Review, a seminar sponsored by Houston-based market consultant DeWitt & Co., that current U.S. ethylene capacity is about 35 billion lb and estimated demand about 32.7 billion lb. This will result in a capacity utilization rate of more than 93% this year. But, he says, periods of tightness of supply could exist in some areas as planned turnarounds and unscheduled outages occur. The shortage may worsen. Wishlinski projects domestic and export demand for ethylene to grow at an average annual rate of 2.6% over the next 10 years, hitting about 39.6 billion lb by the mid-1990s. He forecasts ethylene operating capacity will be about 40 billion lb in 1996. "Numerous factors [affect] current capacity, including the frequent disparity between 'nameplate' capacity and 'operating' capacity, production run lengths, feedstock flexibility, debottleneck potential, and possible demothballing," Wishlinski says. "Still, we expect that the U.S. ethylene supply/demand situ-
ation will continue to tighten, necessitating startup of some mothballed capacity or debottlenecking before 1990, with the U.S. industry becoming fully loaded by the mid1990s." The lack of capital investment in U.S. ethylene facilities is one of the topics of a Commerce Department study last year titled, "A Competitive Assessment of the U.S. Ethylene Industry." According to the study, the U.S. ethylene industry no longer has the edge in world markets that it once held. "An increasing reliance on the supply of ethylene derivatives from Canada and other producing countries will make it even less likely that any U.S. company will invest the capital dollars in a new . . . plant," the report says. The resources of the hydrocarbonrich developing countries will form the basis for much of the world's new ethylene capacity through, at least, 1990 and probably beyond, the study adds. In the developed countries, reactivation and extensive modification of existing mothballed plants will be used to increase capacity and will be driven by the prevailing cost of oil. Styrene is in somewhat the same position. However, Thomas L. Caltrider, director of petrochemicals for Borg-Warner, predicted at the DeWitt meeting that there will be increased capacity for this monomer in the 1990s as producers install process improvements and eventually build new plants. Caltrider forecasts operating rates of 96 to 97% for styrene through the rest of the 1980s, with demand slowing in 1990 and then building again at the same time as some new capacity is coming on stream. This will pull operating rates down to about 90% by 1992. Thus, he envisions excess capacity after a short period of tightness, high profits, and some spot shortages. William C. Kuhlke, vice president, DeWitt & Co., sees shortages devel-
oping for thermoplastics. In world markets, tightness in the polypropylene market is already apparent, he told the seminar. At a 7% growth rate for 1987, operating rates will be 94% of capacity, which includes some mothballed slurry lines already reactivated by Himont. Thus, he says, shortages of specific grades will increase as the year progresses. Kuhlke also predicts tight supplies for high-density polyethylene. If demand grows 7% annually, shortages can be expected as early as next year. If demand grows 5%, shortages will be postponed until 1989. Compounding the HDPE supply situation are plants that can produce both low-density and highdensity polyethylene. On a worldwide basis, low-density polyethylene plants operated at 87% of capacity in 1985. At 5% or higher growth, plants this year likely will be operating at about 89% of capacity. At this level, Kuhlke says, there won't be many plants available to swing to high-density polyethylene production without cutting back the quantities available for the lowdensity polyethylene market. The problem can be somewhat alleviated, he adds, by sufficient debottlenecking. The problem that most observers see for the petrochemical industry in the U.S. is that no new plants have been announced. This raises the question of just how much of the increased demand can be made up with debottlenecking until a new plant can come on stream; it takes three to four years to build a new plant. Alternatively, will U.S. producers have to cut back on exports and increase imports to fill domestic demand, further eroding the chemical trade surplus? This last scenario seems likely to many in the industry, who believe that much of the basic petrochemicals supply for the U.S. will come from overseas producers in the form of derivatives and finished products. William Storck, New York April 27, 1987 C&EN
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