15 February 2019
Ethylene is primarily a petrochemically derived monomer used as a feedstock in the manufacture of plastics, ﬁbers, and other organic chemicals that are ultimately consumed in the packaging, transportation, and construction industries, as well as a multitude of other industrial and consumer markets. Nondurable or consumable end uses—in particular, packaging—account for more than half of ethylene derivative consumption worldwide. One particular plastic resin, polyethylene, accounts for 62% of total ethylene consumption. Because ethylene is one of the largest-volume petrochemicals worldwide, with such a diverse derivative portfolio (including nondurable and durable end uses), ethylene consumption is sensitive to both economic and energy cycles. Moreover, because of its size and broad usage, ethylene is often used as a benchmark for the performance of the petrochemical industry as a whole.
The following pie chart shows world consumption of ethylene:
Over the past ﬁve years, ethylene consumption has increased at an average rate of 4% per year, with the majority of the increased consumption deriving from growth in Northeast Asia, North America, and the Middle East; within these three regions, ethylene derivative capacity has been developed to capitalize on superior ethylene cost-competitiveness (Middle East, North America) or to serve booming markets (Northeast Asia). Overall demand for ethylene derivatives is now fueled primarily by the emerging world.
Polyethylene (HDPE, LDPE, and LLDPE) is the major outlet for ethylene. The next-largest market is ethylene oxide (EO), used primarily to produce ethylene glycol (EG), which itself is used primarily in the production of PET (for polyester ﬁbers, PET bottles, and polyester ﬁlm). EO accounted for 15% of the ethylene market in 2018. The third-largest outlet is ethylene dichloride (EDC), which is used for the production of PVC. In 2018, EDC accounted for 9% of global ethylene consumption. Other major ethylene uses include ethylbenzene, alpha-oleﬁns, and vinyl acetate.
Polyethylene has been a key ethylene demand driver over the past decade and is expected to remain the single-largest ethylene outlet over the forecast period, increasing its share of the world’s ethylene consumption to 64% by 2023. Overall, ethylene demand is exposed to the broader economy, underpinning diverse sectors. Some derivatives tend to be more cyclical as they are ultimately used to produce durables (EDC, EB, alpha-oleﬁns, acetyls), while others (HDPE, LDPE, LLDPE, EO, or linear alcohols) tend to be more resilient as they are used primarily in consumable products.
Over the next ﬁve years, global consumption of ethylene is forecast to grow faster than average world GDP growth rates. Polyethylene production will account for the largest share of new ethylene consumption, followed distantly by ethylene oxide and ethylene dichloride. Ultimately, ethylene demand will be driven primarily by growth of polyethylene-based consumables; increasing PET ﬁber, bottle, and packaging demand; and increasing requirements for PVC used in construction and pipe applications. Furthermore, the recent ban on waste material imports into China is bound to further support incremental demand growth for virgin plastic material (polyethylene for instance). China alone is projected to account for a large percentage of new ethylene demand anticipated through 2023; the country’s growing middle class, improving living standards, and fast-developing infrastructure is driving signiﬁcant ethylene demand growth.