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White Plains, New York, USA
Tuesday, October 19, 2021

Cost curves and the evaluation of petrochemicals cost competitiveness and investment attractiveness

Upcoming Report

Over the last decade, the petrochemical industry has added over one billion tons of annual capacity for products in the major petrochemical value chains such as ethylene, propylene, butadiene, aromatics, and derivatives to meet burgeoning product demand, especially in developing regions and major manufacturing centers.

In the next few years, more than 500 million more of petrochemicals capacity is expected. On a global level, investment in the major petrochemical value chains, especially ethylene and propylene and their derivatives, has outpaced demand and as these plants come on line, the spread between demand and supply will widen. This imbalance in supply and demand can drive operating rates and relative margins lower, negatively impacting return on investment for years while demand catches up with supply.

With expectations of global demand growth into the future, further capacity additions will still be needed beyond 2025, but when is the right time to invest in new capacity? One tool often used by planners to understand a potential project’s competitiveness is cost curves. With cost curves, planners can compare production costs for prospective investments with those of industry peers and quantify strategic advantages of different feedstock or process, and plant location. When coupled with offtake options, price and market forecasts, and capital investment, cost curve analysis can provide further insight into producer margins, profitability, and return on investment.

NexantECA is preparing a report entitled “Cost Curves and the Evaluation of Petrochemicals Cost Competitiveness and Investment Attractiveness” that uses features of its Cost Curve Analysis program and Markets and Profitability program to help project planners understand when petrochemicals investments will be needed following the spate of capacity addition currently in progress, and where to build new capacity that will provide the most attractive returns.

Product coverage include ethylene and derivatives (HDPE, LLDPE, LDPE, MEG, EDC, VCM, and PVC), propylene and derivatives (polypropylene, propylene oxide, acrylonitrile, acrylic acid), butadiene and derivatives (butadiene rubber, SBR, ABS) and aromatics and derivatives (benzene, styrene, PS, EPS, cumene, phenol, acetone, bisphenol A, polycarbonate, para-xylene, PTA, PET).

The report helps address many questions related to future petrochemical plant investments:

  • Which products will require capacity additions after so much new capacity is just beginning to come on line?
  • Where should new capacity be built? Where will project investments command the most competitive cost position?
  • What feedstocks will provide an advantaged cost position and how does that translate to derivatives profitability and return on investment?
  • How is production cost competitiveness aligned with regional product demand?
  • Is achieving the lowest cost position a good recipe for maximizing return on investment on a delivered to market basis?

About Us - NexantECA, the Energy and Chemicals Advisory company is the leading advisor to the energy, refining, and chemical industries. Our clientele ranges from major oil and chemical companies, governments, investors, and financial institutions to regulators, development agencies, and law firms. Using a combination of business and technical expertise, with deep and broad understanding of markets, technologies and economics, NexantECA provides solutions that our clients have relied upon for over 50 years.

 

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