Axens 2016 Industry Outlook
2015 was highlighted by a crude oversupply of 1.3 million b/d, which played a part in keeping oil prices at a low level, fluctuating between $40 and $60/bbl. Such prices stimulated fuel demand and refined products’ demand in general, thus allowing for a 1.9% leap to reach 94.5 million b/d in 2015 as opposed to a 0.8% rise the previous year.
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The consequences have been positive for refiners, especially European, who saw their margins recover to reach a level unheard of in years (between $6 and $10/bbl). The countereffect of an affordable barrel is that petroleum companies that were able to salvage their year through downstream industry sales (refining and petrochemicals) saw their revenues decrease as crude prices fell. Therefore, these companies committed to investment reduction programmes that impacted upstream mainly, as well as downstream. Investment reduction in the industry is estimated to reach an annualised average of $15 billion.
In the petrochemical industry, naphtha price decreases allowed European steam crackers to improve their competitiveness towards the US, which uses affordable ethane, produced by the exploitation of shale gas. In September/October 2015, ethylene production margins on one side or the other of the Atlantic had converged whereas a year before the gap reached $700-800/t in favour of the US.
In 2016, crude over-supply should remain at least until Q3, maintaining prices at a low rate for a good part of the year. Demand should still be stimulated and progress by 1.2% to reach 95.7 million b/d, probably driven by motor fuel demand, including in Europe.
Demand in olefins (ethylene, propylene) should continue to grow by 3-4% per year in 2016 and the growth for aromatics could reach 5-6% per year. That will continue to drive capacity expansion, even if crude oil prices stay low.
These estimations will depend highly on GDP growth. The common consent is that global growth should be about 3.6% in 2016. In the Euro zone, the world’s second most important economic area, GDP should rise by 1.6%, and in the US economy by 2.8%. However, these estimations rely greatly on China’s economic performance, which is estimated to reach 6.3% in 2016. A more consequent slowdown of the Chinese economy would lead to lower projections.
While writing these lines, the climate change conference COP 21 has not taken place yet and these conclusions are not set in stone.
However, it is clear that the growing scarcity of resources, climate change, and population growth, but also man’s aspirations for a better quality of life, are the many parameters that define the context in which we evolve. For manufacturers on dynamic markets, big consumers of raw material, committing to sustainable development is no longer an option. It has become a responsibility coupled with levers for innovation, performance and growth.
Axens is resolutely engaged in providing the market with ever more eco efficient technologies, reconciling environmental performance and competitiveness. These technologies associate products and services whose environmental impact is limited throughout their lifecycle.
Energy efficiency, which contributes to reducing the ecological footprint of our activities, is also an area to be improved on every day. As a result, our industrial sites are subjected to natural resource consumption optimisation programmes (energy, water, raw material) and other programmes to reduce our impact in terms of atmospheric pollution, effluents and waste.
Turning those challenges into opportunities is a concern to all those who wish to contribute to a better future for us and generations to come.
This short article originally appeared in PTQ's Industry Outlook Feature, in the Q1 2016 issue.
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