Proposed propane dehydrogenation (PDH) units in USA likely to lead to renaissance

08-Apr-13
Recent announcements of eight PDH units to be built in the US over the next 3-5 years has led many market players to believe in more pricing stability leading to a resurgence in demand for PP, as per ICB in ICIS. This change will come at an apt time for buyers. Since December 2012, US PP prices have followed feedstock propylene prices up by 31%, but in March, prices fell by 6 cents/lb - tracking lower propylene costs and kicking off what is expected to be a long slide down. In these times of wild propylene volatility, when prices are just as apt to swing up by 15 cents/lb (US$331/ton) one month as they are to swing back down by 20 cents/lb the next, it is hard to imagine a future golden age for any of its derivatives - especially polypropylene (PP). The 8 new projects announced by 6 different producers in North America could bring at least 4 mln tpa of propylene capacity to market. So far, there have not been any significant announcements about new PP capacity planned for the US. However, with US production rates running typically in the low-80% of capacity range, market participants say there is plenty of room for existing plants to increase production rates to absorb some of the extra propylene that will be produced. And as with planned expansions in the US ethylene and PE markets, much of any additional capacity created will be targeted at the export market. With global PP demand growth estimated at 5% per year, and US PP demand growth significantly lower than that, it makes sense for US producers to eventually target global buyers.
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