The use of industry and the evolution of oil prices

The use of industry and the evolution of oil prices Recovering petrochemical demand varies by geography and value chain and depends on epidemiological and macroeconomic impacts.

In one of our scenarios, demand could reach pre-COVID-19 levels by the first quarter of 2022.

On the supply side, some players have delayed or canceled capacity building programs.

However, we anticipate more than 2022 – possibly even by 2025 – that there is significant additional capacity, because

Increasing the capacity of the lag gas takes time.

Oil price transformation

The use of industry and the evolution of oil prices

Lower oil prices have reduced cost curves, especially in methanol and ethylene, and reduced value reserves, especially for players.

Who have access to the desired raw materials.

While there is considerable uncertainty about oil prices, several industry forecasts show a “long-term” scenario.

Industry players have only a few options to address, including delays in capacity building and rebuilding current capacity.

Due to the crisis, ethylene consumption was expected to be around 85% between 2020 and 2025.

(While 89% in 2019).

However, several recent scenarios suggest that utilization levels are likely to decrease even more

Capacity remains below 85%.

A silent recovery scenario shows that the average industry will use about 81% of the industry by 2025.

In addition, the impact on the reservoir shows a 16% decrease in value and will not return to 2019 levels until 2023.

In the long run, ethylene use may improve in the second half of this decade, although that depends on the overall behavior of the industry.

If investments are limited, it may be used up to 2017-18 levels by 2030

Reach, or remain below the 2019 level if significant capacity is added.

Limited impact of petrochemical supply chain

Has had a limited effect on supply chains of major petrochemicals and polymers, but demand dependencies on supply chains

It has highlighted the global supply.

Change management agenda

Petrochemical management teams need to update their strategic plans to reflect the lessons learned from the first half of 2020.

Including the following changes:

Use scenarios to manage recovery.

Given the uncertain outlook for the global industry – and the potential for long-term uncertainty for the next 12 to 18 months – companies need to

Create a scenario-based market.

Fit to specific value chains and geographic footprints, these perspectives can make decisions focusing on profitability and cash flow.

Lead strategically and operationally.

Regional supply chains

Prepare yourself for growing regional supply chains.

The petrochemical industry began to globalize following the globalization of the supply chain, which was driven by desirable raw materials.

This means that it has had a limited effect on the supply chains of petrochemicals and major polymers (apart from selective bottlenecks due to locking).

However, the epidemic of demand-side dependence on global supply chains — as well as potential adverse effects

Highlights drug-mediated N95 masks and disinfectants.

According to a recent report by the McKinsey Global Institute, up to 35% of the annual EBITDA of the chemical industry is due to disruption

The supply chain is at risk.

Increase capital productivity

Increasing capital productivity with excess capacity and decreasing operating cash flows by 2025, companies must

Review your investment lines.

In addition, they should focus on improving productivity for advanced and ongoing projects

For example, by renegotiating prices or setting a project completion time.

Digital scale and analysis in business and operations

Digital scale and analysis in business and operations. Global digital developments can lead to significant marginal improvements

For chemical companies.

Petrochemical players should use advanced analysis to reduce purchase costs, reduce consumption

Maximize energy, improve efficiency and productivity, and optimize product prices in a dynamic business environment.

Continue the transition to a circular economy.

Low oil prices, lower overall demand and greater consumer and safety concerns

Epidemics may slow the transition to a circular economy.

As issues become more complex, systemic challenges – such as lack of product standardization and inefficient sorting processes – keep recycling rates short-term and average.

However, a recent McKinsey poll found that 87 percent of recyclers expect consumers to continue to support sustainable or recycled products, regardless of the crisis or recession.

The implication is that recycling and transition to a circular economy is imminent.

Petrochemical companies

Petrochemical companies have several challenges in their recovery path to overcome them.

Learning from the past few months and making several managerial changes based on conscious and realistic perspectives can make all the difference in adapting to the next normal situation and getting out of the crisis stronger than before.