China, North America face propylene oversupply

From current levels of 109 mln tons, global propylene production capacity will increase to 165 mln tpa by 2030, prompting a radical shift in historical supply relationships, as per a forecast by oil and gas analyst Wood Mackenzie Ltd. As per this report by OGJ Downstream Technology Editor, while propylene traditionally has been a byproduct of both ethylene from steam crackers or refined fuel products from oil refineries, these sources have not been able to keep up in recent years with global demand growth. These supply shortfalls have been particularly acute in China, where demand growth exceeds investments in traditional sources of propylene, and in North America, where the shift to shale gas-based ethane feedstocks have reduced propylene yields from steam crackers. These supply shortages from steam crackers and refineries have led to substantial investments into alternative technologies to boost global propylene supplies, including methanol-to-olefins (MTO), methanol-to-propylene (MTP), and propane dehydrogenation (PDH). Not only will this investment glut over the next five years lead to near-term threats of oversupply in China and North America, but also will permanently alter the paradigm of propylene’s global supply and market pricing dynamics. In addition to other new PDH units and expansions under consideration by C3 Petrochemicals (Ascend), Formosa Plastics, Petrologistics, REXtac, and Williams Energy Canada, Dow Chemical Co. and Enterprise Products Partners LP each are spending more than US$1 bln to construct and start up new PDH units by early 2016. With the start-up of these new PDH units, North American propylene prices likely will start to decline as the market becomes saturated with supplies. As the largest importer of propylene and propylene-derivative chemicals currently, China is seeking to adopt a long-term propylene self-sufficiency strategy with a focus on PDH investments, which began with Tianjin Bohai Chemical Industry Co.’s commissioning of the first PDH unit in late 2013, according to WoodMac. In addition to four new PDH units scheduled to start production this year, there are more than a dozen additional PDH plants in China currently under investment consideration, the study shows. China’s plan for propylene self-sufficiency also includes investments in MTO and MTP technologies, which will capitalize on the country’s vast coal reserves. While North America and China are addressing their propylene shortfalls with alternative technologies and feedstocks, WoodMac forecasts Europe will solve imbalances to its propylene supply with additional imports. “European crackers are shifting to lighter feeds where possible as evident by the announced intentions to import ethane from the US by Ineos, SABIC, and Borealis, while others continue to study similar options,” explains Alex Lidback, WoodMac’s head of chemical research for Europe, the Middle East, and Africa.