Orthoxylene

06 August 2001 00:00  [Source: ICB]

Operating rates are expected to increase by 2004, as markets tighten and prices and margins improve

Updated from product profile, ECN 16 October 2000

UsesOrthoxylene (OX) is one of the three commercial isomers of xylene. Nearly all OX is used to make phthalic anhydride (PA) which is converted to plasticisers, alkyd and polyester resins. Small quantities are used in solvent applications, bactericides, soya bean herbicides and lube additives.

Supply/demandEurope had a disappointing year in 2000, with demand growth closer to 1% than the expected 3%. Total production in Europe last year amounted to 451 000 tonne, out of a total capacity of 647 000 tonne/year, according to the Association of Petrochemical Producers in Europe (APPE).

This year is faring no better. Demand is weak from the PA sector, which turned in a poor performance during its peak season in quarter two. OX sales have been below predicted levels and production rates remain tailored to meet contractual demand, reducing spot availability to a minimum. This has had little impact, as spot markets have been virtually inactive for several weeks and buyers are struggling even to take minimum contract volumes.

The recent exit of various players in the derivative PA market has also reduced offtake. Financial problems at major consumer Sisas has culminated in the sale of its PA assets in Feluy, Belgium, to BASF and at Ostend, Belgium, to Proviron. BP closed its facility at Hull, UK, in May and Portuguese PA producer Driftal ceased operations early this year. Lonza is also looking to withdraw from PA.

PricingEuropean contracts rolled over into quarter three from quarter two at E494/tonne. Spot markets have stagnated recently as end users remain absent. Recent export business has been done at $350/tonne fob Rotterdam.

TechnologyMixed xylenes are produced by severe catalytic reforming of naphtha, producing a C8 stream containing ortho-, meta- and paraxylene, and ethylbenzene. Xylenes are also obtained from the pyrolysis gasoline stream in a naphtha steam cracker and by toluene disproportionation (TDP). The xylenes are passed through a splitter, where the bottom stream is sent to a distillation column to produce high purity product.

Health and safetyOX is a clear, colourless liquid with an aromatic odour. It is soluble in ethanol but not in water. It is toxic and flammable and, because vapours are heavier than air, flashback is a potential hazard. Poisonous gases are produced on burning. Vapours can irritate the eyes, nose, throat and skin. High levels can cause dizziness, unconsciousness and death. Repeated exposure may damage bone marrow.

OutlookQuarter three will be difficult, with reduced offtake at consumers which could extend into quarter four as well, although producers are hoping for an improvement by end 2001.

DeWitt forecasts world capacity to grow from around 3.9m tonne/year in 1999 to about 4m tonne/year in 2004. Europe, the Middle East and Africa hold 39% of the world market. Asia's share is forecast to grow from 1999's 38% to 41% in 2004 at the expense of the Americas, whose share will decline from 23% to 20% in the same period.

Total global production of 2.84m tonne/ year in 1999 will rise to 3.3m tonne/year in 2004, pushing operating rates up from 73% to 83%, which should mean higher margins. No new capacity has been announced and the market is expected to tighten and underpin prices by 2004. Capacity reductions in the Americas will increase operating rates there to 97% by 2003, which is likely to attract more capacity. Post 2004, prices could drop, assuming new capacity starts up because of higher operating rates. OX capacity is cheap and easy to install.

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EUROPEAN ORTHOXYLENE CAPACITY, '000 TONNE/YEAR

Company	Location	Capacity
Western Europe
Atofina	Gonfreville, France	110
Cepsa	Algeciras, Spain	35
DEA	Heide, Germany	12
	Wesseling, Germany	60
EniChem	Priolo, Italy	70
	Sarroch, Italy	70
ExxonMobil	Botlek, Netherlands	100
PCK	Schwedt, Germany	38
Petkim	Aliaga, Turkey	46
Petrogal	Oporto, Portugal	50
Veba	Gelsenkirchen, Germany	55
Eastern Europe
INA	Rijeka, Croatia	18
	Sisak, Croatia	55
Kirishinefteorgsintez
	Kirishi, Russia	60
Lukoil Neftochim
	Burgas, Bulgaria	20
Petro Borzesti	Borzesti, Romania	8
Petrobrazi	Brazi, Romania	36
PKN	Plock, Poland	30
PO Omsknefteorgsintez
	Omsk, Russia	165
Slovnaft	Bratislava, Slovakia	10
Ufaneftekhim	Ufa, Russia	200

Source: ECN/CNI

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