Chemical Profile Ethylene Oxide (EO)

11 October 2004 00:01  [Source: ICB Americas]

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ETHYLENE OXIDE

October 11, 2004

PRODUCER	CAPACITY*
BASF, Geismar, La.	485
Dow Chemical, Plaquemine, La.	610
Dow Chemical, Seadrift, Tex.	925
Dow Chemical, Taft, La.	1,470
Eastman Chemical, Longview, Tex.	230
Equistar Chemicals, Bayport, Tex.	750
Formosa Plastics, Point Comfort, Tex.	550
Huntsman, Port Neches, Tex.	1,015
Old World Industries, Clear Lake, Tex.	780
PD Glycol, Beaumont, Tex.	640
Shell, Geismar, La.	1,260
Sunoco, Claymont, Del.	120
Total	8,835

*Millions of pounds per year of ethylene oxide (EO). Commercial production is by catalytic oxidation of ethylene using oxygen. More than 65 percent of industry production is hydrated to ethylene glycols, and the remainder, purified for the production of ethoxylates, ethanolamines and other intermediates. Most EO producers are vertically integrated into EO derivative production. Shell Chemical is eliminating its oldest EO production unit at Geismar, La., apparently because of high operating and maintenance costs. Its attendant ethylene glycol plant will also be closed. The EO unit is rated at 350 million pounds, but after the closure in December the site will still have two EO units with a combined annual capacity of 910 million pounds. Shell is also considering a future EO expansion at Geismar--capacity undisclosed. Meanwhile, to minimize the impact that the closure could have on customers, Shell has increased its capacity for high-purity EO at the remaining units in Geismar and entered into supply agreements with Dow that will begin in January 2005 and involve both EO and ethylene glycol. Old World Industries purchased Celanese Corp.'s EO/glycol business in 1999. Celanese continues to operate the facilities in Clear Lake, Tex., for Old World Industries. In 2002 the company made improvements and raised capacity to 780 million pounds, up from 700 million pounds. In 2001, BASF increased EO capacity at Geismar, La., by 485 million pounds per year, briefly bringing the total to 1,080 million pounds. The following year the company closed its two older EO units at the site, eliminating 595 million pounds of capacity. Along with the EO terminations, BASF also closed its 890 million pound-per-year ethylene glycol unit at the site. BASF announced it was exiting the ethylene glycol business and would instead focus on the purified EO market. In 2002 Huntsman permanently closed a 175 million pound-per-year EO unit and an associated 240 million pound-per-year ethylene glycol plant, which were idled due to an EO facility explosion in 2000. Sunoco closed its plant in Brandenburg, Ky., eliminating 110 million pounds of EO capacity, in November 2000. PD Glycol is a 50-50 joint venture between DuPont and Equistar. Profile last published 8/20/01; this revision 10/11/04.

DEMAND

2002: 7,615 million pounds; 2003: 7,820 million pounds; 2007: 8,735 million pounds, projected. Demand equals production plus imports (2002: 32.0 million pounds; 2003: 28.3 million pounds) less exports (2002: 14.0 million pounds; 2003: 17.0 million pounds).

GROWTH

Historical (1998-2003): -0.8 percent per year; Future: 2.8 percent per year through 2007.

PRICE

Historical (1998-2003): High, 61.0c. per pound, contract, Gulf, tanks, f.o.b.; low, 33.0c., same basis. Current: 45.5c., same basis.

USES

Ethylene glycol, 50 percent; ethoxylates (surfactants), 13 percent; ethanolamines, 13 percent; diethylene, triethylene and polyethylene glycols, 9 percent; glycol ethers, 7 percent; miscellaneous, including polyether polyols, choline derivatives and hydroxyethyl cellulose and starch, 8 percent.

STRENGTH

Ethylene glycol (EG) is EO’s largest application segment at 50 percent of the total take. In 2003, production of EG is estimated to have been about 5.3 billion pounds, requiring 3.9 billion pounds of EO. Consumption of EO for EG production is expected to grow at roughly 3 percent per year through 2007. About two-thirds of EG goes into the production of polyethylene terephthalate (PET) and antifreeze. The remaining share is taken up by exports and numerous relatively minor uses. The largest use for ethylene glycol is PET, which is consumed for the production of fiber, film, bottles and engineering resins. The market will be driven primarily by the increased requirement for PET bottles.

WEAKNESS

The second-largest application for EG after PET is in antifreeze formulations. Through 2007, annual consumption of antifreeze will decline slowly at an average rate of 0.4 percent. This decline results from antifreeze recycling, long-life coolants and the substitution of propylene glycol-based antifreeze. In 2003, antifreeze formulations consumed 1.3 billion pounds of EG, which required an equivalent 1 billion pounds of EO.

OUTLOOK

The EO market is tight on the supply side because of strong demand for EG and other derivatives. EO plants are running slightly above 90 percent of capacity, a level that is not judged to be sustainable. Thus, the market has a potential for shortage because of unforeseen operational problems. The tight situation is also in effect globally, and US exports are up 15 percent over same time last year. The situation will likely persist until the next large plant comes on stream in early 2005. Sabic subsidiary Jubail United Petrochemical is presently completing its 1.4 billion pound EG plant with more than 1 billion pounds of EO capacity at Al Jubail, Saudi Arabia. Future growth, through 2007, is projected to be 2.8 percent per year.

By: Mark Kirschner
+1 713 525 2653

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