LITERATURE REVIEW

2.2 Market Demand and Analysis

2.2.2 Price of Raw Material

According to the Independent Commodity Intelligent Services (2020), the price

markets for the materials involved (benzene, ethylene and ethylbenzene) are volatile as they
are petrochemical derivatives and are thus dependent on the price of crude oil. Hence, the
prices are subjected to fluctuations from time to time depending on the state of the economy
amongst other factors. The prices listed for the materials in this project are taken from
market analysis performed by Independent Commodity Intelligence Services (ICIS) Pricing.
Based on the benzene price analysis conducted by ICIS (2019), in May 2019 the price of
benzene was assessed at $620/tonne (RM2646.16/tonne). In May 2019, the price of ethylene
CFR (cost and freight) in the market peaked at around 1000$/tonne (RM4268/tonne). The
prices of all feedstock listed in Table XXXXXXXXXXXXXXX. From the table, benzene is
the lowest costing raw material at RM2.65/kg whereas ethylene is the most costly at
RM4.27/kg.

Table 1: Price of feedstock and products

Material Name Classification Price ($/kg) Price (RM/kg)
Benzene Raw Material 0.62 2.65
Ethylene Raw Material 1.00 4.27
Ethylbenzene Product
GLOBAL OUTLOOK FOR FEEDSTOCK

The market for benzene is affected by numerous factors ranging from economical to
environmental. As the primary production of benzene is as a byproduct in steam crackers,
oil refineries and coke ovens, its supply is not only propelled by the demand in benzene but
rather by the demand for other products such as gasoline, ethylene, steel, fibres,
petrochemicals and so on[ CITATION SuJ18 \l 1033 ].

Figure 1: Benzene value chain (Source: Wood Mackenzie Chemicals)

As a result of benzene’s wide variety of sources as well as being a versatile precursor

to an array of products, the benzene value chain is very complex as shown in Figure
XXXXXXXXXXXXXX. Bearing in mind that benzene is a by-product derived from the
petrochemicals, its price in the market is subjected to fluctuations as it is directly affected by
the oil economy. Due to its carcinogenic and hazardous nature, benzene remains to be a
highly regulated industry in terms of environmental policies which too has a substantial
effect on the supply trend of benzene.

Figure 2: Global benzene consumption by derivative (Source: Wood Mackenzie Chemicals)

According to Wood Mackenzie Chemical’s (2018) analytics shown in Figure

XXXXXXXXXXXXX, it is evident that the largest source of consumption of benzene is
from ethylbenzene (styrene). According to data analytics from Market Research Future
(2018), one of the major factors that has led to increasing demand of the benzene market is
the many useful benzene derivatives such as ethylbenzene, cumene, nitrobenzene which
accounted for 85% of the market globally in 2018.

The global benzene market was led by the Asia Pacific region specifically China in
2018 with a projected CAGR of 7.8%[ CITATION Mar18 \l 1033 ]. In rapidly developing
Asian regions such as China, both the high rate of consumption and the production of
benzene are driven by their growing automotive, plastics, construction and oil & gas
industries[ CITATION IHS19 \l 1033 ]. Contributions to the regional market are also made
by other Asian countries such as Japan, India and South Korea as well as Southeast Asian
countries like Malaysia, Thailand and Indonesia. In second place is North America largely
due to giant corporations such as Dow and ExxonMobil Corporation that produce benzene
on a massive scale. Given the strict environmental policies in the European region, market
growth is likely to be deterred but the presence of large automotive companies such as
BMW, Volkswagen and Mercedes-Benz counters that.

Ethylene’s widely versatile and diverse array of usage has led it to become one of the
largest volume of petrochemicals used. The worldwide production of ethylene was 165
million tonnes in the year 2017 and is projected to reach a CAGR of 6% [ CITATION
Mar18 \l 1033 ]. Owing to the market’s huge volume and diversity, ethylene production is
often the metric employed to gauge the performance of the energy sector, overall economy
or petrochemical industry of a region. Major corporations such as Dow, Shell, BASF and
Repsol are significant contributors to this market.

Figure 3: Global ethylene demand by application (Source: CPMA)

 From Figure XXXXXXX, the main driving force of the ethylene market appears to
be coming from polyethylene (HDPE, LDPE, LLDPE) production followed by ethylene
oxide, ethylene dichloride and others. Over half of the global ethylene consumption comes
from polyethylene, which is a plastic used to make packaging. With that being said, many
businesses are shifting towards a greener approach which entails drastically reducing their
use of plastic packaging. This shift could certainly impact the ethylene consumption
however ethylene remains to have a wide range of uses in the fibers, automotive,
construction and agricultural sectors.

The global ethylene market is also dominated by Asia specifically China. The
demand in ethylene is driven by the overall robust development occurring in these regions.
In Asia, the increase of use in industries involving packaging, construction, agrochemical
and textile is a contributing factor. Rapidly growing industrialization, urbanization and
agriculture has boosted the demand for its ethylene-based products. In India, exports for
textile products in 2017 skyrocketed to 39.2 billion US dollars and played a massive role in
the growth of Asia’s ethylene market. In Europe market growth is deterred by tight
environment legislation by the EU on Volatile Organic Compounds (VOCs) emissions. In
the United States, similar regulations that regulate the use of ethylene are also in place and
hinders the growth of their ethylene market.
 LOCAL MARKET FOR FEEDSTOCKS

The Malaysian economy remains to be the third largest in Southeast Asia and this is
largely driven by the chemicals industry which has benefitted from the country’s abundant
natural resources and in turn contributed to the country’s economy. Within the chemicals
industry, petrochemicals and oleochemicals are the dominant trades largely attributed to
factors such as feedstock availability, infrastructure and service[ CITATION ECh20 \l
1033 ]. According to the Ministry of International Trade and Industry (MITI)’s report
(2017), a staggering investment worth RM2 billion was allocated for the expansion project
in a propylene, ethylene, benzene and toluene plant in Malaysia.
 Table 1: Major petrochemical feedstocks in Malaysia (Source: Malaysia Investment
Development Authority)

Material name Capacity Producers in Malaysia

1) Lotte Chemical Titan (M) Sdn. Bhd.

Benzene, 888, 000 tonne/year 2) Petronas Chemicals Aromatics Sdn. Bhd.
Toluene, 3) Pengerang Refining Company Sdn. Bhd.
Xylene (BTX)

1) Lotte Chemical Titan (M) Sdn. Bhd.

2) Petronas Chemicals Ethylene Sdn. Bhd.
Ethylene 1 million tonne/year 3) Petronas Chemicals Olefins Sdn. Bhd.
4) Pengerang Refining Company Sdn. Bhd.

Driven by factors such as the availability of feedstock at high capacities and fast
developing petrochemical infrastructure, Malaysia has geared itself to be a petrochemical
hub in the Southeast Asian region. As shown in TableXXXXXXXXXXX, the high
capacities of raw materials such as BTX at 888, 000 tonnes/year and ethylene at 1 million
tonnes/year that act as vital precursors for a broad range of sectors including petrochemical,
construction, plastics, automobiles and polymers will certainly fuel the growth of these
markets. In the year 2018, Malaysia raked in RM 33 billion worth of investments from some
of the largest players in the petroleum industry. Potential investors looking to invest in
Malaysia’s petrochemical sector are able to benefit significantly from the cutting-edge
facilities in integrated petrochemical complexes such as Pengerang Refining Company Sdn.
Bhd. which offers centralized services and efficient transportation networks that in turn
results in savings[CITATION Mal20 \l 1033 ]. Infact, numerous collaborations and
investments have been made by big players in the industry such as BP, Shell, Saudi Aramco
and many others who have set up petrochemical operations in Malaysia. While there is
certainly a large supply for the market, Malaysia does not have a large enough local demand
for petrochemicals due to its small population and slow developing polymer industry.
Despite its small domestic demand, Malaysia is a big player in the Southeast Asian market
of petrochemicals like benzene due to its open economy and incentives provided by the
government. Numerous free trade agreements such as the ASEAN Free Trade Agreement
were signed by the government and as a result in 2016, participating countries contributed to
a staggering 62.3% of Malaysia’s total exports worth around RM490.1 billion (MITI, 2017).

References
EChemi. (2020, June 1st). Retrieved from Benzene Price Analysis:
https://www.echemi.com/

Foo, D. C. (2015, November). American Institute of Engineers (AIChE). Retrieved from The
Malaysian Chemicals Industry: From Commodities to Manufacturing:
www.aiche.org/cep

IHS Mark It. (2019, October). Retrieved from Benzene: https://ihsmarkit.com/

Karim, R. (1991). Petrochemicals for Malaysia. Progress in Pacific Polymer Science, 309-
313.

Malaysia Investment Development Authority. (2020). Retrieved from

https://www.mida.gov.my/home/

Market Research Future. (2018). Retrieved from Global Benzene Market Research Report:
https://www.marketresearchfuture.com/

Ministry of International Trade and Industry. (2020). Retrieved from

https://www.miti.gov.my
Nithyanandam, R., Yew, K., Tang, S., Then , C., Ong , S., & Ismail, N. (2018). Review on
production of benzene from petroleum associated gas by dehydro-aromatization,
partial oxidation of methane and methanol-to-aromatics processes. Journal of
Engineering Science and Technology, 13(12), 4290-4309.

Su, J. (2018, August 21). Wood Mackenzie Chemicals. Retrieved from Outlook for Asia
Benzene and Styrene: http://www.woodmac.com

Yeow, P. (2020, January 24). Independent Commodity Intelligence Services (ICIS).

Retrieved from SE Asia ethylene market strengthens on tighter supply, fresh
demand: https://www.icis.com/