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Oversupply casts a shadow on global petrochemicals in 2024 – World News Network

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New Delhi [India], January 4 (ANI): The global petrochemicals industry faces headwinds in 2024 as economic uncertainty, weak operating rates, and oversupply continue to limit the prospects for a robust recovery.
According to S&P Global Commodity Insights, despite signs of demand stabilization, chemical makers are cautious about predicting the pace of recovery amid persistent challenges.
Weak economic growth and oversupply in 2023 resulted in subdued demand for most petrochemicals, exacerbated by severe inventory destocking and weak overall demand.
While there are hopeful indications of demand stabilization, the trajectory of recovery remains uncertain.
Higher inflation, interest rates, and geopolitical tensions further contribute to the challenges and risks faced by chemical producers.
The outlook for the global economy and energy markets presents a mixed picture, with regional variations.
The US has exhibited surprising strength, while China struggles to regain momentum, and the Eurozone faces the prospect of a recession.
S&P Global forecasts a slowdown in annual global real GDP growth to 2.3 per cent in 2024, down from 2.6 per cent in 2023.
Dated Brent prices are forecasted to decline from USD 93/b in October to USD 81/b in March 2024, with potential volatility attributed to geopolitical turmoil and economic uncertainties.
Post the first quarter of 2024, prices are expected to rise, with S&P Global’s annual average forecast for Dated Brent at USD 85/b in 2024 and USD 76/b in 2025.
Despite the challenges, the US-headquartered Dow remains cautiously optimistic.
Jim Fitterling, Dow’s Chairman and CEO, acknowledges challenging market conditions persist but notes indications of potential improvement in the coming year.
Fitterling said, “The third quarter was the first [in 2023] with year-over-year volume growth in the core business. This slowdown in the industrial economy started in the middle of last year from our perspective, which puts us 12-15 months into a downturn. And usually in a market correction like we’ve been seeing, we start to see things turn back the other direction in the 12- to 18-month time period. We’re watching carefully.”
Dow observes year-over-year volume growth in its core business, with specific attention to monoethylene glycol (MEG) pricing as a recovery indicator.
The global ethylene market, serving as a proxy for petrochemicals, signals a supply-driven surplus through 2026.
Plastics demand experienced lower-than-expected performance due to inventory restocking and weak durable goods demand.
Major polymer destocking distorted underlying demand comparisons, with year-on-year global demand growth forecasted close to zero for polyethene and polyvinyl chloride in 2023.
Polypropylene demand is expected to rebound to 3 per cent-4 per cent in 2023, following a weak 2022 with virtually zero annual demand growth.
Robert Stier, senior lead for global petrochemical analytics at S&P Global Commodity Insights said, “We are forecasting 2024 polymer demand to increase back to GDP levels or slightly higher after two weak years. It’s all about Asian growth in 2024, however, as the rest of the world is slowing down. The demand forecast is somewhat optimistic assuming “stable GDP and some end-user inventory restocking at zero margin and low prices. However, there is no realistic demand scenario that makes 2024 plastics margins sustainably bullish.”
The outlook for 2024 anticipates a recovery in polymer demand to GDP levels or slightly higher, primarily driven by Asian growth.
However, the rest of the world is expected to experience a slowdown.
Despite reaching a peak in October, global petrochemical prices are projected to decrease into early 2024, influenced by lower energy and feedstock prices.
Naphtha margins remain challenged, with ethylene margins below seasonal averages.
The European region faces the weakest ethylene margins and disappointing derivative demand.
S&P Global’s base case assumption suggests ethylene capacity rationalization of approximately 10 million-15 million mt over the next two or three years, aiming for sustainable margin recovery starting around 2026.
The current environment underscores the necessity for industry consolidation and rationalization to combat low-margin conditions through 2025.
US petrochemical producers are expected to maintain a relative advantage, benefiting from significant natural gas and ethane feedstock cost advantages.
Despite the downturn, there is a sustained urgency around energy transition efforts and industry investments in decarbonization and advanced recycling projects to address plastic waste.
While challenges persist, a significant portion of the Billion-Dollar Club – Chemical Week’s annual ranking of the world’s top 100 chemical makers – has committed to carbon-neutral or net-zero goals by 2050.
88 per cent have set interim reduction targets for 2030, reflecting the industry’s continued commitment to sustainability amid a challenging operating environment. (ANI)


Disclaimer: This story is auto-generated from a syndicated feed of ANI; only the image & headline may have been reworked by News Services Division of World News Network Inc Ltd and Palghar News and Pune News and World News


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