Petrotahlil - Economic disruption as a result of the COVID-19 pandemic has caused a fall in demand for petrochemical products such as propylene and its derivatives. Companies have responded to this low-demand environment by decreasing operating rates or closing production units. GlobalData suggests companies should consider a wider range of factors that are likely to aid decision-making in the near future, such as the pace of global economic recovery and propylene market conditions.
John Paul Somavarapu, Oil and Gas Analyst at GlobalData, comments: “The COVID-19 outbreak and a decline in oil prices have forced companies to announce project delays. Projects under initial phases of development foresee postponement, as companies are likely to re-evaluate investment strategies. Supply chain disruptions and labour shortages have affected the under-construction/commissioning projects. Companies should work closely with contractors and suppliers to develop a revised project timeline.”
Propylene capacity additions are largely concentrated in Asia, with China leading the way by targeting self-sufficiency to meet its growing propylene demand. China is followed by other countries also capitalising on growing demand and leveraging feedstock advantage such as India, Iran and the US.
Somavarapu concludes: “Propylene is among the largest produced petrochemicals and has seen steady growth over the years. It is expected to grow at a healthy 2.6% compound annual growth rate (CAGR) over the decade.
“Companies will need to undertake a disciplined approach to deploy capital, including postponement or slowing down of selected growth projects and altering shutdowns. Companies are expected to remain optimistic on fundamentals of [the] propylene industry over the medium-long term and are likely to pursue ongoing/new investment opportunities accordingly.”
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