Published July 1993
This report analyzes the historical profitability of ethylene cracking and polyolefins production, and makes projections of margins and prices to 2002. Profitability is estimated/projected both on a year-to-year basis and in terms of the lifetime discounted cash flow return-on-investment for facilities started up at various points in time.
The report examines in depth the relationship between producer margins and capacity utilization, and how that relationship underpins the cyclicality that appears to be endemic in the petrochemical industry. It also reevaluates the applicability of experience curves for tracking the ongoing cost reductions in the industry, and develops the concept of using experience curves to project the movement over time of industry supply curves (production cost distributions). These various elements are then combined to provide a rational framework for developing likely scenarios for profitability and for projecting prices.
The analysis also yields basic insights about the structure of the industry and its driving forces, and the report examines its implications for cost competitiveness, vertical integration and investment strategies. Although the quantitative evaluations focus on ethylene, propylene and the polyolefin resins, the insights developed and the conclusions drawn are generally applicable to the commodity petrochemicals industry as a whole. The report will be useful to planners and managers in the chemical and related industries.
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