"This is the worldwide first study of its kind, it provides complete transparency of the ethylene market, beginning with feedstocks up to the final products," said Oliver Kutsch, CEO of Ceresana. "The value added in downstream sectors is considerable. Besides polyethylene plastics, direct applications of ethylene include important chemicals such as alpha olefins used to increase rigidity of polyethylene, ethylene oxide needed in the manufacturing of PET plastics, and ethylbenzene, which is predominantly processed into polystyrene. Other applications are vinyl acetate monomer and the elastomer EPDM."

Shale gas boom

Ethylene is mainly produced from ethane, propane, butane and naphtha. The shale gas boom in the U.S. resulted in a surge of announcements to construct new ethane crackers. Until 2018, U.S. ethylene capacity is scheduled to increase by about half. Compared to other feedstocks, cracking of ethane yields a rather high amount of ethylene. Ceresana forecast about three quarters of ethylene output to be based on ethane in 2021.

Considerable decline of feedstock costs

The notable decline of prices for ethane in recent years has caused a significant change of the cost situation for manufacturers of ethylene. Average feedstock costs per ton of ethylene manufactured fell by about 40% between 2008 and 2013. Manufacturing ethylene from ethane enjoys a notable competitive advantage.In the fourth quarter of 2013, cash costs (consisting of fixed, variable operational and feedstock costs minus profit generated with by-products) were two thirds lower when using ethane than when using naphtha as feedstock.

Polyethylene prime application

In 2013, about 60% of U.S. demand for ethylene was accounted for by producers of these plastics. Depending on density and rigidity of the product, polyethylene is classified as either HDPE, LDPE or LLDPE. In the future, ethylene will mainly be utilized to manufacture polyethylene. Large new production site for HDPE and LLDPE in particular are being constructed. Given the upturn of the real estate sector and ever increasing consumption expenditure, prospects for domestic demand in the U.S. are good. The impulses in construction and packaging have corresponding effects on demand for polyethylene. However, sales volume of polyethylene on foreign markets has to rise notably in the future in order to ensure an acceptable degree of capacity utilization of US facilities. 

Export hit PVC

The plastic PVC is manufactured via the intermediates ethylene dichloride and the vinyl chloride manufactured from it. In the past, notably more than 40% of U.S. PVC output had been exported. This was a major support for the PVC industry that suffers from low domestic demand. Thus, the strong need for modernization of the water supply and sewage networks in the U.S. should have a positive effect on the demand for PVC.