Petrochemicals struggle in 2023

The petrochemicals market is weak in 2023 for a number of reasons, including:

• Slowing demand growth: Global demand growth for petrochemicals is expected to slow in 2023, due to a number of factors, including the global economic slowdown, rising inflation, and the energy transition. According to a report by S&P Global Commodity Insights, global petrochemicals demand is expected to grow by just 2.5% in 2023, down from 4.5% in 2022.

• Oversupply: The petrochemicals market is also facing an oversupply situation, as new production capacity comes online in China and other parts of Asia. According to a report by Fitch Ratings, global petrochemicals capacity is expected to grow by 5% in 2023, outpacing demand growth.

• High energy costs: Petrochemicals producers are also facing high energy costs, as the war in Ukraine has disrupted global energy markets. This has made it more expensive to produce petrochemicals, which has put downward pressure on prices.

• Weak downstream demand: Demand for petrochemicals is also being weakened by weak demand in downstream markets, such as construction and automotive. According to a report by IHS Markit, global construction output is expected to grow by just 2.9% in 2023, down from 4.1% in 2022.

The following statistics illustrate the weakness of the petrochemicals market in 2023:

• Global ethylene prices have fallen by more than 50% since their peak in March 2022.

• Global polyethylene prices have fallen by more than 40% since their peak in March 2022.

• Global polypropylene prices have fallen by more than 30% since their peak in March 2022.

• Petrochemicals producers' margins have declined sharply in 2023. For example, Dow Chemical's margins fell from 24% in the first quarter of 2022 to 9% in the first quarter of 2023.

The weakness of the petrochemicals market in 2023 is likely to have a negative impact on the global economy, as petrochemicals are used in a wide range of products, including plastics, fertilizers, and pharmaceuticals.

The petrochemicals industry is taking a number of steps to address the challenges it faces in 2023, including:

• Cutting production: Petrochemicals producers are cutting production to reduce supply and support prices. For example, Dow Chemical has announced plans to cut production of polyethylene and polypropylene by 15%.

• Reducing costs: Petrochemicals producers are also reducing costs to improve margins. This includes measures such as furloughing workers and closing plants.

• Investing in new technologies: Petrochemicals producers are investing in new technologies to improve efficiency and reduce costs. This includes technologies such as carbon capture and storage and renewable energy integration.