CEH Report

Table of Contents

Abstract

Ethylene is a petrochemically derived monomer used primarily as a feedstock in the manufacture of polymer plastics, fibers and other organic chemicals that are ultimately consumed in the packaging, transportation and construction industries and in a multitude of industrial and consumer markets. Nondurable or consumable end uses—in particular, packaging—make up more than half of ethylene derivative consumption worldwide. One plastic resin, polyethylene, accounts for 55–60% of the total use of ethylene. Because ethylene is one of the largest-volume petrochemicals worldwide, with such a diverse derivative portfolio, ethylene demand is sensitive to both economic and energy cycles. Moreover, because of the size and broad use patterns of its markets, ethylene is often used as a surrogate for the performance of the petrochemical industry at large.

The following pie chart shows world consumption of ethylene:

The effects of the global economic downturn, which began in late 2007, continued through 2008, and reached a low point in 2009, have been taken into consideration in this analysis of ethylene. World GDP declined 1.9% in 2009 but economic conditions rebounded strongly in 2010 (4% growth), with the stabilization and improvement in world economies. Unexpectedly strong petrochemical growth resulted from a better-than-normal rebound in consumption and the restocking of the inventory supply chain that usually occurs after a recession. Ethylene growth responded strongly early in the rebound cycle, with the quick pickup in polyethylene and ethylene glycol sales into packaging and textile end uses and with the rapid upturn in the Chinese ethylene industry from the 2008 decline. The petrochemical recovery accelerated in the second half of 2010 and earlier estimates of a 4% recovery in ethylene consumption gave way to actual growth of nearly double that for the year.

In 2008, production and consumption of ethylene had declined about 4% at the beginning of the recession. The ethylene consumption decline during 2008–2009 would have been worse if not bolstered by demand in Asia and its fastest-growing country, China. Ethylene is usually less affected by recessions than other petrochemicals, because its principal consumable packaging markets track more-stable food sales. However, the severe 2008–2009 economic recession featured an unprecedented inventory decline in the supply chain and that exacerbated ethylene sales weakness in packaging markets. World ethylene consumption managed to grow 3% in 2009, leading the world economic recovery, followed in 2010 by strong worldwide growth in consumption of just over 8%.

Global demand for ethylene is forecast to grow at about world average GDP growth rates over the next five years, or around 3.4% per year. This growth has been boosted by the hasty rebuilding of the supply chain inventory of packaged goods, all the way to retail and business outlets in developed and even developing economies.