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.




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
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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