In the 1970s, propylene was only priced at around 60% of the ethylene price. This value-leakage led producers to focus development effort on propylene derivatives, particularly polypropylene, as per ICIS. As a result, in the 1980’s, the combination of propylene's lower price relative to ethylene, and its increasingly higher quality, led to better volumes. And so propylene was normally able to sell at between 70% - 85% of the ethylene price on an annual average basis.
The mid-2000s saw another rise in propylene's relative price due to increasingly tight ethylene and benzene markets, which prompted some converters to seek alternatives to polyethylene and polystyrene. In turn, this helped propylene's growth rate to move to 1.2 x global GDP, vs 1.0 x level of ethylene.
In 2010, propylene is move to pricing parity with ethylene.
Will this lead to increased investment in on-purpose production, such as metathesis and propane dehydrogenation, despite some major volumes coming onstream in the Middle East and Asia, particularly China, where huge investments have been made in new refinery-based propylene production. Around 30% of propylene is currently produced by refining, and the recent reduction in refining rates will lead to reduction in propylene output. Will propylene derivatives be able to compete successfully at today's higher prices? The ICIS blog believes it would be very dangerous for companies to ignore these questions, and simply assume that the world will soon return to the pricing basis of the 1980s - 90s.