Ethylene production is rapidly expanding across the Middle East and Asia, with new cracking facilities coming online and existing ones undergoing major expansions. As supply increases, many companies are turning their attention to China, which has become a key market for global ethylene producers. Jim Weinrauch, an analyst at Singapore-based Naphtha Information Services LLC, commented on the global ethylene landscape: “In the long run, all new production capacity will eventually be directed toward the fast-growing Chinese market.” However, despite current shortages caused by rising demand in China, some analysts warn that the country’s demand may not keep up with high expectations. Weinrauch added: “China has captured the interest of companies across Asia and the Middle East. In Asia, only China remains a major importer, which is quite evident.” Qu Guangdong, an analyst at Beijing-based SRIConsulting, predicts that China’s domestic ethylene output will grow by 9.5% annually through 2015. Several new projects are currently under construction, including CNPC’s plant in Fushun, Liaoning Province, which is set to start operations in 2010 and produce 800,000 tons of ethylene per year. Another PetroChina facility was recently approved by the National Development and Reform Commission and will double its annual cracker capacity to 1.2 million tons. Qu emphasized that regardless of international developments, China is determined to build its own production capacity. Weinrauch noted that this push for self-sufficiency could leave foreign producers behind. He said: “Technically, demand is emerging gradually. But the Middle East should continue to consider whether China needs more crackers while it’s still expanding.” Weinrauch also pointed out: “In the Middle East, when real production capacity is established, China is pushing for self-sufficiency. This means the room for everyone won’t be very large.” Although some companies had anticipated a drop in import demand, Qu remains cautious, stating that the positive outlook for ethylene will persist in the next few years. He added: “I estimate that several crackers will be built before 2010, but some projects might be delayed until around 2015. These delays could help ease supply-demand pressures.” Gao Chunyu, senior director at Sinopec Consulting, mentioned that the development has faced numerous challenges. He explained: “Many companies are unhappy with signing engineering contracts. Although this is a global issue, it has already affected China.” He also highlighted that the rapid expansion of cracking plants in China has led to a growing shortage of engineering personnel. Gao said: “The construction of new plants is still ongoing, but the pace has slowed down.” While this is a worldwide challenge, as long as China continues to rely on imports, downstream companies will still face high prices. Despite the increase in new cracking plants, Qu warned that importing raw materials won’t be the only factor influencing ethylene derivative prices. He added: “Rising international oil prices will also cause price fluctuations, meaning future capital costs will likely increase.”

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