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Global economic recovery and rising crude oil prices push global industries into the business cycle

global economic recovery and rising crude oil prices push global industries into the business cycle

March 12, 2018

[China paint information]

in 2017, about 3/4 countries in the world achieved accelerated economic growth, which is the highest proportion since 2010. Euro zone countries also joined this round of growth, including Argentina Some large emerging economies such as Brazil and Russia have also come out of recession. On the whole, the global economy has entered an upward cycle, and the upward strength has been continuously strengthened. According to the report released by the world bank in January 2018, the global GDP growth rate reached 3% in 2017, and it is expected to continue to rise steadily in 2018, reaching 3.1%, both far higher than the 2.4% in 2016

crude oil prices rose gently in 2017, with an annual average price of about $54/barrel. Although there are still many uncertainties in the market in 2018, the news that OPEC, Russia and other non OPEC countries will extend the crude oil production reduction agreement to the end of 2018 still increases the possibility of crude oil prices rising, which is expected to rise to about $60/barrel in 2018. The recovery of the global economy and the rise of crude oil prices indicate that the boom cycle of the chemical industry is coming

in the next few years, the average annual growth rate of global demand for chemical products will be about 4%. Most of the growth will come from developing countries, of which 2/3 will come from the Asia Pacific region. The main reason for the growth is the expansion of the global middle class. It is estimated that by 2040, the middle class in India and China will reach more than 1billion people respectively. The chemical industry is increasing investment in the whole industrial chain to meet the population change trend, and the global chemical product production capacity will also maintain a growth trend. The new production capacity mainly comes from North America and developing countries in Asia, the Middle East and Africa. The growth rate in Western Europe and Japan will be lower than the global average, and the growth rate in Latin America will also be lower than the average in the short term

strong growth in the output of chemical products in the United States

the abundant and cheap natural gas in the United States has brought great cost advantages to the production of chemical products and has become an important driving force for investment in the chemical industry. By the end of 2016, the investment in the U.S. chemical industry based on natural gas (including liquefied natural gas and shale gas) as raw materials had reached $164 billion, involving a total of 264 projects. These projects are expected to bring an annual output of 105billion US dollars of chemical products, and the profit margin is basically maintained at more than 30%. In 2017, three new cracking units were put into operation in the United States, all located in Texas, with a total capacity of 3.55 million tons. This is the first new cracking unit put into operation in the United States in 15 years. In the next few years, many new cracking units will be put into operation in the United States

in 2017, the capital expenditure of the U.S. chemical industry reached $38billion, accounting for half of the total expenditure of the entire manufacturing industry, an increase of 6.3% over 2016. It will continue to increase in the future. It is expected that the growth rate will reach 6.3% in 2018 and 6.9% in 2019, and will reach $48billion in 2022. Affected by the transformation of the U.S. manufacturing industry, the growth of enterprise investment, and the recovery of oil and gas production, the output of U.S. chemical products (excluding drugs) continued to increase, with an increase of 0.8% in 2017, and is expected to increase by 3.7% and 3.9% in 2018 and 2019 respectively. Among them, the output of basic chemical products in 2017 was the same as that in 2016, which is expected to increase by 4.7% in 2018 and 5.2% in 2019; Special chemical products benefited from the increase in the output of oilfield and mine chemical products, adhesives and electronic chemical products. The output increased by 3% in 2017 and will further increase by 2.3% in 2018. The new output is mainly digested by exports to Asia, Latin America and other regions

the speed of structural adjustment and upgrading of China's chemical industry has accelerated

China is the world's largest consumer and producer of chemical products, and the demand for chemical products accounts for 1/3 of the world. Despite the recent economic slowdown, the demand growth rate decreased slightly, accounting for 5.8%, but the absolute volume accounted for more than 50% of the global growth. It is the country with the largest increase in the demand for chemical products, and this trend will remain unchanged in the future. Under the influence of supply side structural reform, rising western trade protectionism, increased government supervision of safety and environment, and strengthened participation of private enterprises, the pace of structural adjustment and upgrading of China's chemical industry has accelerated. In 2017, the 40million ton/year refining and chemical integration project of Zhejiang Petrochemical and the 20million ton/year refining and chemical integration project of Hengli Petrochemical have entered the construction and installation stage. The million ton ethylene project of Gulei refining and chemical integration project has broken the ground, and in addition, Shenghong 16million ton/year refining and chemical integration project, Sinochem Quanzhou 1million ton/year ethylene and refining reconstruction and expansion projects are under construction. The layout of domestic refining and chemical industry is more reasonable. It not only comprehensively considers resources and market advantages, but also pays more attention to the importance of the impact of logistics conditions on competitiveness. The pattern of integration and base is basically formed

after more than 50 years of development, petrochemical industry in China has been constantly improving and maturing. From the past increment, it has entered the deep adjustment period of optimizing stock and strengthening increment, and some devices with poor profitability will be eliminated. Coal chemical industry is constantly improving technology and improving the operation level of devices, changing the past extensive development mode, paying attention to energy conservation and environmental protection, innovating the construction and operation mode, refining the raw material processing path, improving resource utilization and reducing costs. The investment and R & D focus of the industry is turning to new chemical materials, high-end special chemicals, biochemical industry, modern coal plastic recycling granulator to treat the waste plastics in daily life and regenerate them into plastic raw materials, chemical industry, energy conservation and environmental protection and other fields required by the enterprise in order to reduce power noise. In the next 10 years, the technological progress and refinement of China's chemical industry will be greatly improved, and it is expected to move from a world chemical power to a chemical power

India is vigorously developing its petrochemical industry

India's economy is growing strongly. India's GDP grew well in 2017, about 7.2%. However, its consumption of petrochemical products is only 1/4 of the global average, and half of it comes from imports. It is estimated that by 2019-2020, the demand for petrochemical products in India will increase from the current 30million tons/year to 40million tons/year, with a corresponding increase of US $65billion to US $70billion in investment. At present, India is vigorously developing its petrochemical industry. The Indian government has taken important measures, such as Indian manufacturing, infrastructure improvement, smart cities, etc., to promote the further growth of demand for petrochemical products, and promote the construction of petrochemical investment zones in Andhra Pradesh, Gujarat, Orissa and Tamil Nadu. India's three major state-owned oil refining enterprises also plan to invest $35billion to expand their petrochemical business to meet their growing domestic demand from plastics to coatings and adhesives. BPC plans to build petrochemical complex in bina and Koch refinery. Shindstein Petroleum Company (HPC) cooperates with Gail to build a 1.1 million ton/year petrochemical plant in southern India. HPC will combine the 2million ton/year petrochemical complex located in Rajastan refinery with the 1.3 million ton/year petrochemical complex under construction by HPCL Mittal energy (HME) in Bhatinda refinery. Indian oil company also plans to expand the petrochemical production capacity of patadip and panipet in the next five to seven years

India's huge market potential is constantly attracting foreign investment. In recent years, multinational chemical companies including BASF, LANXESS, Bayer, Klein, DuPont, etc. have set up subsidiaries in India and increased investment. In the past five years, the average annual growth rate of India's petrochemical industry has been 10% - 12%, and it is expected to continue to grow at an average annual rate of 12% - 15% in the next 10 years

Saudi Arabia's chemical industry is becoming more and more important in the non oil economy

although the reduction of oil revenue and government expenditure has led to the slowdown of Saudi Arabia's domestic demand growth and the weakening of economic activities to some extent, the chemical industry plays an increasingly important role in the non oil economy, and the export of chemical products accounts for about 60% of non oil exports. Saudi Arabia's cash cost for the production of chemical products with gas as raw material has always remained the lowest in the world, with absolute competitive advantage. At the same time, it has withdrawn from the test state. The Saudi government will further accelerate the reform and development of the chemical industry, promote the market development strategy, improve its contribution to the non oil economy, and transform Saudi Arabia into a diversified national economy

in 2017, sadara chemical company (Dow Chemical and Saudi Aramco joint venture) invested $20billion in chemical complex units, which were all put into operation, becoming the world's largest single chemical complex, making Saudi Arabia's diversification strategy a big step forward. The joint venture has 26 production units, with an annual output of more than 3 million tons of high-performance plastics and special chemicals, many of which are high value-added chemical products produced for the first time in the Middle East, significantly improving Saudi Arabia's ability to obtain maximum value from each hydrocarbon molecule. The launch of the joint venture will transform Saudi Arabia from a consumer and importer to a global exporter

Saudi Arabia has chemical plants in the United States, Europe, Asia and other regions in the Middle East, and is still investing a lot of follow-up funds to ensure the integration with the most cutting-edge production technology. SABIC's petrochemical production bases in the Netherlands and Germany are mainly 3 Sensory quality is engaged in the production and marketing of polypropylene, polyethylene and hydrocarbons

SABIC also plans to take advantage of the advantages of shale oil and gas in the United States to obtain competitive raw materials, and build a new ethane cracking unit in Texas with ExxonMobil Chemical Company, with a capacity of 1.8 million tons/year, which can provide raw materials for one ethylene glycol unit and two polyethylene units, and continue to consolidate the company's leading position in the industrial chain. In addition, Saudi Aramco, an oil giant, and Saudi Basic Industries, a chemical enterprise, are planning to invest $20billion to build a device for directly converting crude oil into chemicals, and actively build the world's largest petrochemical industrial park

the operating rate and profit margin of global ethylene plants continue to maintain a high level

globally, the operating rate of ethylene plants continued to rise in 2017, reaching 91%, as shown in Figure 1. Among them, the operating rates of ethylene plants in Asia and Europe with naphtha as raw material increased from 89.8% and 78% in 2013 to 94.2% and 94.8% in 2017, respectively, with significant growth; Affected by the insufficient operating rate of coal (methanol) to olefin units, the operating rate of ethylene units in China fell to a low level of 77.5%, but the operating rate of naphtha cracking units reached 91.8%, slightly higher than the world average. On the whole, the long-term low oil price has restrained the operating rate of ethylene production units with non steam cracking routes such as coal and methanol

since the second half of 2014, benefiting from low oil prices, the cash cost of naphtha cracking units in Asia and Europe has decreased significantly, and the gap with the cost of ethane cracking ethylene in the Middle East and North America has narrowed from $500-900/ton in 2012-2014 to about $300/ton in 2017. Overall, the global ethylene profit has been at a good level since 2014, as shown in Figure 2. In 2017, the total profit of the world petrochemical industry reached more than $200 billion, a 10-year high, of which the olefin industry accounted for 66% of the total profit. With a large number of new olefin production capacity put into operation in 2018, it is expected that olefin profits will be squeezed to a certain extent, but still at a good level

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