The share held by Middle Eastern producers is comparatively small relative to their presence in the ethylene market, due to the prevalence of ethane-based steam crackers. Major investment in propane dehydrogenation (PDH), the move towards mixed-feed steam crackers, and metathesis is providing a massive jump in propylene capacity as per a report published by Nexant as part of its ChemSystems programs. West Europe and Asia Pacific derive most propylene from naphtha crackers, while supply in the United States is based to a greater extent on refinery production. The scale of developments in Asia eclipses those in other regions. Having historically been of similar size to West Europe or North America, Asia Pacific will become larger than both regions combined by 2010. Developments are principally from steam cracking, and are focused in China, India and Singapore. Reliance has brought on a new 900000 tpa FCC unit at Jamnagar, India in early 2009, although FCC developments in other regions are minimal. The first methanol-based plant is set to start production in China towards the end of 2009. In the Middle East, annualised propylene capacity in 2009 is rising by 45% over 2008, and will increase by a further 50% by 2012. The major increments from PDH and refinery sources are now in place, with the near term development driven by steam cracking and metathesis. Developers of methanol-to-olefins projects in Africa have had an uphill struggle arranging finance, due to the relatively high technological and geographical risk. The sharp downturn in global operating rates may impede further progress in the near term.
Western Europe, the United States and Japan will all see propylene capacity decline in the near term, mainly as a result of closures of uneconomical liquids-based and mixed-feed steam crackers. Investments to increase flexibility of steam cracker feed slates towards lighter feedstocks in these regions has also resulted in a net decrease in propylene capacity at some facilities. Polypropylene is the largest and fastest growing of the major propylene applications, and will account for around 70% of total global propylene consumption by 2020. Polypropylene continues to compete with polyethylene in many packaging applications, and has additional growth opportunities in the automotive sector, although this can also increase cyclicality during economic downturns. Acrylonitrile production growth has been very low due to the substitution of acrylic fibre by other materials. The production of acrylonitrile butadiene styrene (ABS) is a faster growing sector for acrylonitrile and is expected to support marginally higher growth rates in future. Propylene oxide, which has applications in the production of polyols for polyurethanes and propylene glycol, had been the fastest growing of the other major propylene derivatives, however demand for polyurethanes have been significantly impacted by the problems in both the automotive and construction sectors. These sectors will need to recover before propylene oxide can resume its strong growth trend. Demand growth into cumene/phenol has meanwhile entered a slower period of growth following rapid expansion over the last ten years as demand into optical media falters. Oxo-alcohols have been a declining sector of propylene demand in recent years as the market for 2-ethylhexanol has declined sharply due to health and safety concerns surrounding its main derivative, the plasticiser dioctyl phthalate (DOP). The largest uses of the two butanol isomers, normal butanol and isobutanol, are as solvents and for production of butyl acetates, both of which are expected to continue to show steady growth. Acrylic acid production will provide lower demand growth for propylene due to the relatively small scale and the mature nature of the market. The main outlets for acrylic acid are in the production of acrylate esters, superabsorbents and other applications in detergents and flocculants. Isopropanol (IPA) is used principally as an oxygenated solvent, mainly in the coatings and printing inks sector. Growth here is under pressure due to restrictions on VOC content in coatings, and competition from acetone in some applications.
Global demand for propylene recovered in 2009 due to a rebound in PP demand in China, according to US-based consultants DeWitt & Co, as reported by ICIS. China’s consumption of PP accounts for over 15% of the world’s propylene demand. PP demand is also growing much faster than the other derivatives with DeWitt predicting growth rates of 5-6% pa. However, propylene capacity is also growing strongly with 13-14 mln tpa of new capacity coming on-stream in 2009 and 2010. Steam crackers account for most of the additional supply, mainly in China, and also in Singapore, Thailand and India. New refinery-based supply such as the PetroRabigh and Reliance units in Saudi Arabia and India respectively has contributed to the new capacity. On-purpose processes are also becoming more significant in the supply of propylene. A number of propane dehydrogenation (PDH) plants started up in Saudi Arabia in 2009 and new units are planned in the US and Thailand for 2010. A large metathesis plant will account for new propylene supplies in Abu Dhabi and coal-based propylene production is scheduled to start up in China in 2010. While there appears to be plenty of capacity to meet demand, supplies of propylene have been restricted by co-product production from steam crackers and refinery operations. In addition, much of the new propylene capacity is associated with the new PP plants and in some cases propylene cannot be exported from these plants. Although PP demand is expected to grow strongly in Asia, there is an abundance of capacity that will keep operating rates in the low 80s%. In Western Europe, propylene demand has been hindered by both a slow economic recovery and a decline in PP exports due to the expansions in the Middle East and Asia. However, this lack in demand has been offset by restricted supplies. Refineries were hit hard by the recession but should recover somewhat. Steam cracker operators have been consuming more propane and butane feedstocks resulting in the propylene to ethylene production ratio falling. The propylene balance in western Europe hinges on whether the loss in demand from the decline in PP exports will be more or less than the loss of supply from cuts in ethylene production rates due to growing ethylene derivative imports from the Middle East. In the US, propylene supply had tightened by early 2010 as steam cracker production was significantly impacted by the loss of ethylene demand. In addition, there has been more ethane cracking resulting in a drop in propylene production. DeWitt estimates that propylene to ethylene production ratios have dropped from close to 0.3 lbs to just over 0.2 lbs of propylene per ton of ethylene produced, a drop of more than 20%. With a fall in ethylene operating rates, around 30% less propylene in the US was being sourced from steam crackers. The prospect of more refinery propylene in the US also looks limited due to increased use of biofuels, rising fuel efficiency standards and gasoline imports. However, the US will get a boost in supply when Petrologistics starts up its 540,000 tpa PDH unit in Houston, Texas in the summer of 2010. On the demand side, the US will lose its PP export markets due to the new competitive capacity coming on-stream. Domestic demand for all derivatives is recovering, some more slowly than others, but it should result in more propylene demand.