Chemical Profile Propylene Glycol (PG)

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

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October 25, 2004


Arch Chemicals, Brandenburg, Ky.


Dow Chemical, Freeport, Tex.


Dow Chemical, Plaquemine, La.


Huntsman, Port Neches, Tex.


Lyondell Chemical, Bayport, Tex.




*Millions of pounds of propylene glycol (PG) per year. Commercial production of PG is by hydration of propylene oxide. Di- and tripropylene glycols, as well as small quantities of higher glycols, are also produced in the reaction. Propylene glycol capacities at some locations can be supplemented by shifting hydration equipment normally used for ethylene glycol to the production of PG. During the past couple of years Dow Chemical has made improvements that added 75 million pounds of PG capacity to its plant in Freeport, Tex., and 40 million pounds to another in Plaquemine, La. Since fourth quarter 2002, Third Coast Chemicals has been marketing HuntsmanÕs PG and diPG to HuntsmanÕs distributors and non-contracted customers. Huntsman debottlenecked its Port Neches, Tex. facility in 2001, increasing capacity from 120 million to 135 million pounds per year. At the end of 2000, Eastman Chemical withdrew from the market and ceased manufacturing PG in South Charleston, W.Va., eliminating 75 million pounds of capacity. Among the four US producers of PG, only Arch is not back-integrated into propylene oxide. Profile last published 9/24/01; this revision 10/25/04.


2002: 820 million pounds; 2003: 845 million pounds; 2007: 915 million pounds, projected. Demand equals production plus imports (2002: 52 million pounds; 2003: 59 million pounds) less exports (2002: 375 million pounds; 2003: 340 million pounds).


Historical (1998-2003): 0.2 percent per year; Future: 2.0 percent per year through 2007.


Historical (1998-2003): High, 60c. per pound, contract, annual aver., Gulf, industrial grade, tanks, f.o.b. works; low, 44c., same basis. Current: 66c., same basis.


Unsaturated polyester resins, 26.6 percent; functional fluids, 22.5 percent (deicing, 12.2 percent; engine antifreeze, 6.6 percent; heat transfer, 3.7); food, drug and cosmetics uses, 19.6 percent; liquid detergents, 15.8 percent; paints and coatings, 4.4 percent; tobacco humectant, 2.5 percent; miscellaneous, including plasticizer use, 8.6 percent.


Domestic consumption of PG increased only by a small margin over the past five years, primarily because production of unsaturated polyester resins, the major outlet for propylene glycol, was so adversely affected by the slow economy. From 1990 to 2000, total PG consumption increased at a rate of 4 percent per year. Consumption declined by almost 3.5 percent during the economic downturn of 2001 and another 3 percent in 2002. In 2003, PG consumption recovered to 2001 levels.  With the economic recovery, markets such as unsaturated polyester resins, personal care and pharmaceuticals have experienced strong growth. Additionally, the personal care (antiperspirant/deodorant) and liquid detergent segments benefited from reformulations that favored the use of propylene glycol. Over the forecast period, unsaturated polyester resins are anticipated to grow at 2.5 percent annually, with the personal care segment doing somewhat better at 3 percent. Together, these two segments make up 46 percent of the current demand for PG.


The tight supply situation and high energy and raw material costs have recently allowed producers to increase prices. Contract PG prices have been increased four times during the past year, about 30 percent in total, but the gain in price has not translated into improved margins because of the rapid rise in propylene prices since December. Propylene, the precursor to propylene oxide, is obtained either by steam-reforming natural gas liquids or by fluid catalytic cracking heavy refinery fractions. These sources are sensitive to natural gas and crude oil pricing, respectively.


The propylene glycol market is under severe pressure because of the run-up in oil and natural gas costs. Although gas prices have eased since three years ago, when they reached above $10 per mmbtu, gas pricing is now in the $6 to $7 range, still significantly higher than the traditional level of $2 per mmbtu. In addition, crude oil prices have recently reached historic highs at over $50 per barrel. As a result, producer margins are being squeezed despite a series of price increases this year. Additional price increases could be expected with this continuing scenario. In the long term, growth will probably be no greater than 2 percent annually, as nearly all PG applications are mature.

By: Mark Kirschner
+1 713 525 2653

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