Outlook for Chemical Industry

Outlook for Chemical Industry

Author: ChemViews

Professor Rainer Diercks, Member of the Board DECHEMA e.V. and President of the Petrochemicals division at BASF, Ludwigshafen, Germany, gave a positive outlook for the chemical industry at the opening press conference of the ACHEMA.

Actual Situation
The chemical industry has enjoyed high growth rates of more than 3 % per year on average since the beginning of the century. This growth has been mainly a result of strongly growing economies in the emerging markets of South America such as Brazil and especially Asian countries like China, which since 2010 have accounted for half the global demand for chemicals, and led to a growth well above 5 % per year since the economic crisis in 2008–2009.

At present the speed of growth has eased slightly. Diercks says this is mainly due to China’s tightened monetary policy, which has led to a distinct decline in the growth of its economy although in absolute terms, growth in China is still high. He sees another reason in the European debt crisis – or, more precisely, the debt crisis in Southern Europe. Regardless of this, Diercks expects strong growth also for the coming years in the chemical industry. It will be driven by mega trends like population growth, urbanization, increasing mobility, and strongly growing energy demand.

Future Trends

As the main drivers, Diercks sees the emerging markets with more than 75 % of global growth in chemical demand in this decade. Industrial countries are expected to show only moderate growth. China will probably be the largest single market for chemicals and larger than the combined chemical markets in all industrial countries by 2020.

In the industrial countries of Europe and North America, with their low growth expectations in terms of both chemical and overall industrial output, the development will not be consistent. In Europe high energy-related costs lead to significant disadvantages. One part of these costs is the direct cost of electricity, gas or oil, and another part originates from the CO2 certificate system in Europe, which imposes additional costs on all European manufacturers and impacts the competitiveness of the European chemical industry.

North America
Unlike Europe, the chemical industry – especially the petrochemical industry – in North America is currently enjoying a significant raw material and energy cost advantage compared to most other regions in the world. The exploration of unconventional gas sources, most often known as shale gas, allows the production of large volumes of natural gas, ethane and naturals gas liquids in the United States. Accordingly, current gas prices in the United States are significantly lower than in Europe, leading to lower energy costs and offering a large feedstock advantage to all producers of natural gas-based products like, for example, methanol or ammonia.

Moreover, the large volumes of ethane obtained as a by-product in shale gas production have changed the cost position of North American cracker operators from an inferior rank to the second best topped only by operators in the Middle East. This has resulted in idled plants being restarted in North America and in a conversion from naphtha to ethane as cracker feedstock. In addition, investments to install some 11 million tons of ethylene capacity, all based on ethane, have been announced for the coming years, as well as a considerable expansion in downstream capacity for products like polyethylene and ethylene glycol.

This shift to lighter feedstocks causes a different product output pattern in steam crackers. Using a large portion of ethane as cracker feedstock allows production of nearly exclusively ethylene. Typical by-products of naphtha crackers like propylene or butadiene are produced in small amounts only in these ethane-based crackers, which has caused significant increases in the prices of propylene and especially butadiene. As a result, investments in technologies for on-purpose propylene production have already been announced. Beyond this, innovative processes for the dedicated production of butadiene will open up new market potential.

Raw Materials
Until recently oil and consequently naphtha was the main source of chemical production globally. As Diercks sees it, raw materials in the chemical industry are currently shifting from oil to gas, and potentially to coal. The latter is mainly a trend that is limited to China, and its long-term viability appears questionable in the light of higher CO2 emissions and cost issues. In the medium term, fossil raw materials, including oil, will remain the major source for chemicals, mainly as a result of their availability and experience in the use of mature technologies.

Diercks thinks the raw material change will be a gradual process with currently a slight reduction of oil-based feedstocks that will mainly be compensated by gas-based production. Innovation will become an increasingly important differentiator in the chemical industry in the future and catalysis will be of major importance in this innovation process, as it is the key interdisciplinary technology in the chemical industry. Even today more than 80 % of all chemicals are synthesized via catalyzed processes.

Professor Rainer Diercks received his doctorate in chemistry from the University of Hamburg, Germany, and joined BASF SE, Ludwigshafen, Germany, in 1986. He was initially a laboratory head in the Ammonia Lab. Further stations as head of technologies development and plant manager in the Industrial Chemicals Division, as well as an assistant to a board member followed. In 1994, he was appointed Director of Economic Efficiency Evaluation, and then in 1996 Vice President of the Strategic Planning department. From 2001 until 2003 he was President of the Inorganics division. He was President, Competence Center Chemicals Research & Engineering from 2004–2009, when he took up his current role as President of the Petrochemicals division.

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