Two more PDH plants coming onstream in China in 2015 to exacerbate Asia's propylene glut

Four propane dehydrogenation plants have come onstream in 2014 in China. The start up of two more propane dehydrogenation plants in China by mid-2015 will take the total capacity addition to 3.51 million m tpa of propylene. This is expected to exacerbate Asia's propylene glut and likely force the newcomers to curb output to defend their margins, as per sources in Platts. Some of the new plants may also be forced to continue reselling their contracted propane cargoes, in the hope of capitalizing on steady prices for offloading the feedstock during the winter (November through February), sources said. Yantai Wanhua Polyurethanes is set to start up, in Q1-2015, China's single-biggest PDH plant, located in Shandong province, with capacity to produce up to 750,000 m tpa of propylene and will consume up to 900,000 mtpa of propane and 600,000 mtpa of butane. Oriental Energy targets to start its 660,000 m tpa PDH plant in Jiangsu province around end-2014 or early-2015, according to another source familiar with that project, though others said the plant may not start until mid-2015. The most recent startup, the 450,000 m tpa Shaoxing Sanyuan Petrochemical plant owned by China's top propylene importer, has been producing chemical-grade propylene since September 12. It is unclear if the plant is producing polymer-grade propylene yet, although a company source had said it was due to start last week. Sanyuan Petrochemical had aimed to start its plant in Q4-2013, and due to the delay it has been reselling one 44,000 mt propane cargo a month from its term contracts with US exporter Targa and Petredec since February this year, including one earlier this month, according to trade sources. Now that it has started operations, traders are watching to see if it also offers November- and December-delivery cargoes or if it continues to run at reduced rates due to low cracking margins. Sanyuan's PDH plant is currently operating at 60% of capacity, according to sources in Platts. The three other PDH plants in operation are currently running at a maximum of 80% and low cracking margins may well keep them below that level. Analysts opine that the PDH plants may face difficulties reselling propane to a market inundated with US, West African and Algerian supply, while North Asian demand has been tepid. But some Northeast Asian traders and a propylene end-user said last week Tianjin Bohai's plant might have again been shut Wednesday due to a glitch. Company officials could not be reached for comment and no details were known. Despite slow buying interest in the propylene market at the end of last week, there was some demand in northern China, particularly in Tianjin due to the Tianjin Bohai shutdown, various market sources said. One propylene end-user said the PDH plant was expected to restart early October, though a trader said Monday the plant restarted September 25, a day after the outage.