As major oil companies released their first-quarter earnings, profits from their petrochemical units hit record highs and demand for petrochemicals is only set to grow.
According to Bloomberg, this trend is worrying for consumers as construction and manufacturing staples such as PVC and ethylene have increased substantially in price due to pandemic-driven demand, supply disruptions, and the post-Covid economic recovery.
There was a significant increase in demand for several products during the pandemic, most notably - packaging, medical goods, and protective equipment.
As demand for PPE and other medical equipment, both for hospital and private use, looks set to continue for the rest of the year, demand in these areas is not expected to falter any time soon.
This April, ExxonMobil Corp's petrochemical unit announced Q1 profits of $1.4 billion, an increase of $1.271 billion on Q1 2020. This profit was partly due to market disruptions which led to a fall in the availability of several products, particularly in North America as polyethylene and polypropylene production was hit badly by poor winter conditions.
Sadara Chemical Company, a joint venture of Saudi Aramco and The Dow Chemical Company, also reported a surge in profits thanks to the increase in petrochemical prices. With Saudi petrochemicals giant SABIC also announcing a major increase in its profits. A total of nine petrochemical companies in Saudi Arabia have gone from reporting losses to profits between Q4 2020 and Q1 2021 thanks to better petrochemical market conditions.
Experts expect the petrochemical trend to continue throughout 2021, after an initial decline in the market at the beginning of the Covid-19 pandemic.
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In Asia, PetroChina has announced its greatest quarterly profit in seven years. In Taiwan, sales posted in April by the four major subsidiaries of the Formosa Plastics Group (FPG) conglomerate increased by over 80 percent on the previous year thanks to an increase in product demand and prices. Korea's Kumho Petrochemical also saw larger than expected profits, owing mostly to the increase in demand for synthetic rubbers, resins, and phenol derivatives.
There are fears in North America that supply will fail to meet demand, with some producers struggling to recover from harsh weather conditions earlier in the year and hurricane season now looming.
While output might have stagnated in North America, other countries are looking to ramp up their production of petrochemicals in response to the growing global demand for refined oil products.
In Iraq, the Ministry of Oil has been working closely with supermajor Shell to further develop the country's petrochemical industry. Several refineries are already up and running across the country. But Iraq's greatest aim is to establish its $8 billion Nebras petrochemical complex, originally outlined in 2012, to produce 1.8 million metric tonnes of various petrochemicals per year.
While North America appears to be struggling to keep up with growing petrochemical demand, other nations and international oil companies appear to be making the most of the petrochemical boom. Demand is not expected to slow any time soon, as medical equipment continues to be vital for public and private use, meaning there should be plenty more profit in the future for petrochemical companies.
By Felicity Bradstock for Oilprice.com
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Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More