The global petrochemical industry continues to be under pressure in 2024

　Economic uncertainty and weak starts are expected to limit the outlook for a global petrochemical recovery in 2024. While demand is showing signs of stabilisation, an oversupply will continue to lower petrochemical production margins. Due to weak economic growth and excess supply, chemical manufacturers will again face market challenges in 2024. Robert Steele, senior director of global petrochemical product analysis at Standard & Poor's Global Commodity Insight, said the global ethylene market is a proxy for petrochemicals, indicating oversupply by 2026. Plastic demand was lower than expected due to inventory replenishment and weak demand for durable goods. Large-scale polymer destocking distorts the comparison of potential demand. Steele said the year-on-year growth in global demand for polyethylene and PVC will be close to zero in 2023, with global polypropylene demand expected to rebound by 3% to 4%.

The European chemical industry hopes on innovation

　Entering 2024, the European chemical industry is into one of the worst crises ever. Throughout 2023, the industry has struggled to cope with weak demand, which has led to chemical prices falling during periods of historically high costs, particularly energy and feedstock costs, as well as expensive labor costs and regulatory costs. Some European countries are developing action plans to stimulate the industry, and many chemical producers in the region expect success through innovation. Innovation remains one of the strengths of the European chemical industry, with the EU spending about 11 billion euros a year on R & D, accounting for 17% of the world's annual R & D spending, according to Cefic. Innovation is particularly important and potentially beneficial for the EU chemical industry coming years as new recycling, renewable, electrification and high-tech plastic technologies are developed to meet the requirements of the European Green Agreement and all of its relevant regulations.

GCC petrochemical producers face strong headwinds to earnings

　Petrochemical producers at the Gulf Cooperation Commission (GCC) are facing earnings headwinds as sluggish global demand puts pressure on production margins and earnings growth in 2023. However, Jasim Juberam (Jassim Al-Jubran), head of seller research at Saudi broker AlJazira, said the more positive global economic outlook, driven by easing inflation and expected interest rate cuts, had created new hope for the petrochemical industry in 2024. The profitability of petrochemical producers in the GCC region may then improve, after a weakness this year, amid global economic concerns, inflationary pressures and high interest rates. Mr Jublan said: " The recovery in petrochemical prices could be supported by higher oil prices and the expected acceleration of China's economic recovery. Prices are now close to the levels seen during the COVID-19 pandemic, well below the historical average. Therefore, we believe that further downside risks are limited and that a recovery may begin in 2024.”

The U. S. oil and gas industry

　In the second half of 2023, there were some big acquisitions in the U. S. oil and gas industry, the largest in the industry in years. In just two months, each of the three largest U. S. oil companies announced major deals worth more than $135 billion. In October 2023, Exxon acquired Pioneer Natural Resources for $59.5 billion. A few weeks later, Chevron bought Hess for $53 billion. On December 11,2023, Occidental acquired Crown Rock for about $12 billion. Industry executives and analysts expect consolidation in the U. S. oil and gas industry to continue amid high stock values, with many oil and gas companies seeking more oil and gas resources for production in the Permian shale basin. The outlook for shale oil and gas in the Permian Basin is bright, and future mergers and acquisitions here will be very active here. Companies with operations in the Permian Basin will be the most attractive acquisition targets in the future.

(Source: China National Chemical Information Magazine, Issue 2,2024)