The Ethane Forecast 2022 is FGE’s detailed assessment of the mid/long-term operating environment for the global ethane trade. In this new study, we forecast ethane demand and review changing supply dynamics to identify the key factors at play in the rapidly evolving ethane market.
The global growth of ethane cracking capacity will continue to drive global ethane trade, with the USA remaining the world’s biggest supplier. Much of the incremental planned and proposed capacity, including a number of projects on the Chinese mainland, in Europe, and elsewhere, is predicated on the growth of US supply and exports of ethane through the 2020s.
With US shale supply recovering from the prolonged impact of COVID-19, and with the war in Ukraine forcing policymakers to rethink the notion of energy security, US natural gas/LNG appears to be a winner, for now. While it is still unclear to what extent the fallout from Ukraine will water down the Biden administration’s Energy Transition policies, the focus seems to be shifting towards supporting US supply growth.
For now, high crude prices continue to benefit US exporters of ethane. Despite a weak petrochemical market, this will give support to upcoming petrochemical projects in China, Belgium and Mexico, which are expected to require an additional 3-4 mmtpa of US ethane by the late 2020s. How will the economics of merchant ethane crackers fare following this huge rise in ethane demand? Will a shift in US energy policy and production economics be able to support the global ethane trade throughout the 2020s and beyond?
If not, where might new destinations for US ethane exports emerge in the future? Maybe the Middle East? In order to keep pace with this growth and trade, how does the orderbook for Very Large Ethane Carriers (VLECs) look like?