Page 124 - CW E-Magazine (24-9-2024)

Point of View

naphtha cracking operations at its main Verbund site in Ludwigshafen (Germany), where it operates two crackers with ethylene capacities
of 400-ktpa and 200-ktpa – far smaller than the newer builds in Europe and elsewhere. These together can consume about 2-mtpa of
naphtha when operating flat out. LyondellBasell has also announced reassessment of its European portfolio spanning six of its main
European petrochemical facilities at Berre-l’Étang (France); Münchsmünster (Germany); Tarragona (Spain); Brindisi (Italy); Carrington (UK);
and Maasvlakte (Netherlands). These sites have cumulative nameplate capacities of 870-ktpa of ethylene, 445-ktpa for propylene, 638-ktpa
for PE and 1.44-mtpa for PP. The company has said that six of its manufacturing assets do not currently meet its criteria for profitability and
a full range of options including potential closure and divestments will be considered.

Similar story beyond olefins
The aromatics value chain has also not been spared closures. In July this year, Indorama announced it had permanently closed its 700-ktpa
PTA plant and a related 426-ktpa PET plant at Rotterdam (Netherlands). The company also mothballed another 700-ktpa PTA plant in Sines
(Portugal) in November last year.

In late-August this year, BASF announced it will cease production of adipic acid, used as a raw material for making polyamides, polyurethanes,
coatings and adhesives, and two precursors – cyclododecanone and cyclopentanone – in 2025. While the plants for the precursors will
be closed in the first half of next year, the adipic acid plant will follow suit in during the course of the year. Between 2023 and 2026, the
company has announced and partially implemented plans to close plants at the complex making TDI and its precursors (dinitrotoluene and
toluenediamine), ammonia, caprolactam, cyclohexanol, cyclohexanone, fertilisers, and soda ash.

European PC markets have also been grappling with overcapacity, which has been exacerbated by cheap imports, as well as sluggish
demand from the construction and automotive sectors in particular. In response, Sabic permanently closed one of its two production lines
in Cartagena (Spain), in late 2023, as well as an associated line making bisphenol A (BPA). Likewise, Trinseo announced shutdown of its
160-kpta PC line at Stade (Germany) by the end of this year.

Little global impacts
While the announced and the anticipated shutdowns will have some impact on the regional market dynamics, they will do little to alter
the global oversupply situation. The latter has been brought about mainly by a rapid capacity build-up in China, and the dramatic slowing
down of demand there since the end of the pandemic. Globally, about 26-mtpa of surplus ethylene capacity will need to be shuttered by
2027 if cracker operating rates are to return to 2019 levels, and there is no chance anything like that will happen. In fact, the reverse is likely.
New capacity builds in China will alone add about 23-mtpa of new ethylene capacity, largely in the form of naphtha crackers, by 2030.
Even accounting for some delays and cancellations, this is an astonishing build that seems to make little sense considering how oversupplied
markets are. For demand to catch up with all this new capacity will take all of this decade and possibly longer.

But these builds will force capacity rationalisations – particularly in China, Northeast Asia and Europe, given their high-cost structures.

The future for Europe’s chemical industry
At a macro level it seems that the EU chemical industry is in decline. According to data from CEFIC, the EU27’s share of the global
chemical market declined to 14% in 2022 from 27% in 2002. But much of this has to do with the rise of other centres of chemical production
and demand, notably China. That the European industry is still in growth mode is, however, evident from the fact that the value of chemical
sales has increased over the same period, from €363-bn in 2002 to €760-bn in 2022, and capital spending increased to €32-bn in 2022
(a record level) from €13-bn in 2004. R&D spending in the industry is also rising – from €8-bn in 2012 to €11-bn in 2022.

A more nuanced look at the growth trends reveals that while chemical production declined across basic inorganics, polymers,
petrochemicals and specialties between 2021 and 2023, consumer chemicals have managed to show growth. This is likely to be the focus
areas as companies refocus and reassess competencies.

Europe continues to be a major contributor to global chemicals with a favourable environment for innovation, expertise in speciality
chemicals and a strong infrastructure to support business. By adapting novel commercial strategies, making technical innovations, and
carefully considering where to invest in new assets with a focus on emerging markets and geographies, the region’s chemical industry will
reinvent itself. It is not the first time that it has had to do this, and it won’t be the last. While there is some reason to dismiss the region as
a major player in commodity chemical manufacturing, reports of its demise are exaggerated.
Ravi Raghavan

124 Chemical Weekly September 24, 2024

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