02 August 1999 00:00 [Source: ICB]
The future looks bright for propylene oxide, with both
demand and supply on the rise, and a recovery in export markets
such as Asia
West European demand for propylene oxide (PO) is estimated to be
around 1.2m tonne and growing at 3-5%/year, with a similar rate
being recorded in the US. Around 80% of European PO is consumed
captively, largely for polyurethanes, with just 20% appearing on
the merchant market. Global demand last year stood at around 4m
tonne, following on from growth rates put at 3-4%/year through the
1980s and the first half of the 1990s. Growth has quickened
recently to nearer 4-5%/year and is expected to recover to over
6%/year in the Far East by next year.
In 1997 European production capacity was reported to be
operating flat out and supply has been tight until this year.
Operating rates are expected to drop further between 2000 and 2003
as Basell (the 50:50 joint venture between Shell and BASF) and
Repsol have new PO/SM plants coming onstream later this year.
Erdölchemie is expanding its existing units and Dow is
considering extra capacity at Stade. Late last year EniChem doubled
its capacity at Priolo, Italy, and BASF has just added some
capacity at Ludwigshafen, Germany. Lyondell, however, has postponed
plans for its PO/SM unit in the Netherlands until 2003. Extra
capacity is also planned at a number of Far Eastern locations,
including Singapore, where BASF and Shell are planning a similar
unit to the Basell one. The three US producers seem not to be
hiking capacity and it is difficult to see other players entering
Around 90% of propylene oxide (also known as 1,2-epoxipropane or
methyl oxirane) goes into three main uses: polyether polyols (65%),
propylene glycol (21%) and propylene glycol ethers (4%). Polyether
polyols are used in manufacture of polyurethanes, in reaction with
MDI or TDI, while propylene glycol finds a major outlet in
unsaturated polyester resins. Other uses (10%) include production
of flame retardants, synthetic lubricants, oil field drilling
chemicals, butanediol, propylene carbonate, allyl alcohol, modified
starches and textile surfactants.
Propylene oxide can be made by chlorohydrin or hydroperoxide
routes. In the older chlorohydrin process - used by Dow Chemical
and Erdölchemie, amongst others - propylene and chlorine react
in the presence of water to form propylene chlorohydrin which is
further reacted with caustic soda or lime to obtain PO.
A process gaining popularity is the POSM route where
ethylbenzene is first reacted with oxygen to make ethylbenzene
hydroperoxide and then with propylene to form PO. The
phenylmethylcarbinol coproduct is dehydrated to styrene. This route
is used by Lyondell and Shell and in the new plants from Repsol and
Basell. An alternative hydroperoxide route uses isobutane which
makes a tert-butyl alcohol coproduct that can be converted to
Dow has recently purchased POSM technology from
Nizhnekamskneftekhim in Tartarstan and proposes to use it in a 250
000 tonne/year unit in its planned petrochemicals complex at
Much research has been conducted into direct production of PO by
vapour phase oxidation of propylene, but a viable route appears
elusive (ECN 26 January 1998).
Efforts have also been conducted into the direct combination of
hydrogen and oxygen to make hydrogen peroxide coupled with
simultaneous or successive production of PO (ECN 16 March 1998). EniChem is
developing a process based on the reaction of propylene with
hydrogen peroxide catalysed by titanium silicalite.
Health & safety
Skin contact with PO can cause severe irritation or burns while
breathing irritates the nose, throat and lungs. PO may be
carcinogenic in humans. It is a highly flammable and reactive
chemical and is a dangerous fire and explosion hazard.
The tightness of supply in the European market in 1997 took PO
prices to record high levels of around DM2.20-2.40/kg at year end,
but they have been easing down since the start of 1998 with a
steeper drop in January this year followed by a period of
stability. Recent large hikes in propylene feedstock pricing have
sent producers looking for increases, and current price levels FD
NWE Europe are reported at DM2.00-2.25/kg, with most business still
being done at the lower end of this range. Producers are looking
for levels closer to DM2.20-2.30/kg after the summer.
The tightness of the market is expected to loosen as capacity
comes onstream, but most of this is for captive polyols use. BASF,
for instance, will be self-sufficient in PO with the Basell
Europe may be able to export some of the extra capacity to the
US and Far East, especially as growth rates in the latter begin to
recover ahead of expansions there. Thus, with reasonable strong
demand being pulled along by use in polyols (growing at 4-5%/year)
and PO derivatives such as butanediol and ethers, PO supply is not
expected to become long for any great length of time. Pricing
should improve after the decline through 1998 and early 1999, much
of which was occasioned by high inventory and market share
competition around the turn of the year. But whether margins can be
improved after the steep propylene increases remains to be seen.
The outlook looks positive for producers in the longer term.
LEADING PROPYLENE OXIDE PRODUCERS,'000 TONNE/YEAR
||Rimnicu Vilcea, Romania
||Brezg Dolny, Poland
||Port Neches, Texas
*end 2001 +to 200 by Q3 2000 ^expansion to 200 planned
"expansion to 172 by October ±Onstream from 1 October this
year ¤ Huntsman/ICI jv@expansion by 160 planned for 2000
>end 1999 onstream to 250 in October
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