Petrochemicals are derived from petroleum or natural gas. Naphtha is also one of the substances that play an integral role in the production of petrochemicals. They are derived from hydrocarbons such as propane, ethane, butane, or other components separated from crude oil and natural gas liquids.
Petrochemicals define hydrocarbon-based compounds that are widely used in the chemical industry. A manufacturing facility known as Cracker is used for the production of petrochem products. After the crude distillation process, the separated hydrocarbons are fed into hydrocarbons. The cracker facilitates the breakdown of hydrocarbon bonds which in turn allows the formation of useful chemicals. Thus the cracker acts as an intermediate process equipment.
Ethylene is one such example, the monomer is used to produce polyethylene through the process of polymerization. Polyethylene plays an integral role in the plastics manufacturing industry.
Petrochemicals Market Outlook
Petrochemicals contribute to a large segment of the commodity chemicals market. Petrochem products have a vast value chain that includes verticals such as clothing, tyres, digital appliances, packaging, detergents, and countless other everyday items. Thus petrochemical products play an integral role within modern societies.
As of 2018, it was recorded that petrochemical feedstock accounted for about 12% of global oil demand. Demand margins are expected to increase due to increased use of consumer chemical products. This increase in margin is mainly due to increase in purchasing power of the population.
Between the year 2000 and 2016, the petrochemicals market witnessed a modest growth due to the increasing demand for ethylene-based products. Annual production of ethylene increased from 100 million metric tons to about 150 million metric tons between 2000-2016. Shares of the petrochemical company have also outperformed other chemical products during the same period.
Higher operating rates for the petrochemicals sector were primarily driven by growth in the value chain for this market in Asia. Sub-regions such as China and India have an expanding industrial sector which contributes to the expansion rate of the global petrochem market. So petrochemical companies across the world featured buoyant margins due to healthy demand. Demand for ethylene-based derivatives as well as C2 and C3 derivatives adds to the growing demand for Petrochem products within Asia.
Petrochemical companies have benefited from manufacturing using low-cost gas feedstock as opposed to oil-based feedstock. Petrochemical producers in regions such as the Middle East and North America adopted this measure. In the case of North America, shale oil reserves and shale gas surpluses within this market are advantageous in this vertical position. In the year 2014, the price of crude oil had increased. Due to North America’s shale oil reserves, there was a clear advantage to the market in terms of production of C1 and C2 derivatives.
The shale gas revolution within the United States has increased the North American market. As of 2018, North America was home to 40% of global ethane-based petrochemical production.
In the year 2014, the industry faced margin loss in several products, reducing its value across the market. Margin erosion impacted the C4 and Aromatic chains, primarily due to overbuilding by new industry participants in emerging markets.
Demand for petrochemicals in emerging economies
Demand from emerging markets is one of the major drivers for the global petrochemicals sector. Countries like Europe, Japan and South Korea are making substantial efforts to recycle plastic based products. However, the sustainability practices adopted by these countries exceed the current surge in demand for petrochemicals in developing economies. The overall demand of this market is due to paucity of suitable plastic alternatives for certain tasks.
Sustainability and its impact on the global petrochemicals market:
There has been much debate in this market over clean energy practices and their integration among industry standards for petrochemical production. Petrochemicals are considered one of the main blindspots in this global energy debate. The role of petrochemicals in the global energy system is expected to increase.
The clean technology landscape associated with this area is currently being explored by researchers around the world. Industries are trying to develop alternatives to petrochemical products such as plastics that cause environmental degradation. Increased awareness among consumers about the harmful effects of plastics on the environment is expected to act as a major restraint for this market. However, continued research in this segment promises a suitable and sustainable future for the chemical industry.