North American Ethylene –the Impact on Surfactants
(April 15th Racemics Meeting)
I was fortunate enough to be invited to a meeting of the Racemics club in NJ recently and was further fortunate to hear an outstanding talk by TIson Keele of CMAI on the future of North American manufacturing in the ethylene value chain. The talk was fascinating and, true to form for Tison, gave concise insights into what really matters for the chemical industry. Overall, shale gas in North America is going to help ensure that we have an advantaged feedstock position here for ethylene derivatives for the next few decades.
What I found particularly interesting was the expected impact on the surfactant industry - which I think will be significant. Consider the following:
- While oil is an important part of the supply chain, only 7% at best of crude oil ends up in chemicals (most of that polymers). 93% is used in fuel
- Natural gas is now the feedstock of choice to make ethylene in North America, the Middle East and Southeast Asia. Europe and Asia/Pacific still tend to rely on crude oil/ naphtha feeds. This is now putting these regions at a serious cost disadvantage to North America in particular due to the historical low cost natural gas in North America. Historically, there has been a 6 – 7:1 energy equivalency multiple of crude oil to gas. Today it is around 20:1.
- This cost advantage is fairly recent and the industry has not caught up. The newest ethylene cracker in North America as built 12 years ago. With an average 30 year cracker life, there seems to be pent up “demand “ for new cracking capcity in North America.
- Recent announcements by Chevron and, just today, most specifically from Dow plus discussion around Westlake and Formosa Plastics, suggests at least one (Dow), if not all four will add ethylene capacity in the US in the next few years. Notwithstanding new plants, many existing plants are debottlenecking to take advantage of their newfound competitive position.
- Given the expected improvement in North American ethylene cost and availability, there is an accompanying renewal of interest in expanded and even, new ethylene oxide (EO) capacity. Ineos recently has publicly mused about putting EO capacity in North America, to complement its olefins and ethanolamines capacity in the US and its leading position in Europe in EO. Such a move would add a significant new EO player in North America. Dow of course is already in EO in the US and recently re-directed significant capacity in Taft from MEG to EO.
- Approximately 77% of EO goes into making glycols (MEG, DEG and TEG) for PU, textiles and other applications. The other 23% is purified to ethoxylation grade and used in the production of surfactants.
- Therefore the outlook for purified EO costing and availability to support ethoxylation in North America is positive. It looks likely that the work around EO expansion is to be accompanied by work around expanding ethoxylation capacity in North America.
- The prospects therefore for the surfactant industry look robust in North America with much of the potential expanded ethoxylation capacity being directed at ethoxylates and ether sulfates for export markets.
Kudos and congratulations again to Tison for an outstanding talk. It will be interesting to see how these supply chain related themes are addressed at the First ICIS World Surfactant Conference on May 12 / 13th in NJ. Many of the companies there are operating in this and related areas throughout the world.