FocusDow proposes new propylene plant during tight US market

21 April 2011 23:17  [Source: ICIS news]

By Al Greenwood

HOUSTON (ICIS)--Dow Chemical proposed building the second on-purpose propylene plant in the US at a time when the market is contending with rising demand and falling production, a consultant said on Thursday.

Dow announced plans to build a world-scale on-purpose propylene plant in the US, with a start-up date of 2015.

It would be the nation's second propane dehydrogenation (PDH) plant, joining Petrologistics's 544,000 tonne/year plant.

Dow is also considering an option to commercialise its own technology to produce propylene from propane, with the potential start-up of a new production unit in 2018.

Dow announced the projects at a time when demand for propylene derivatives could continue growing while feedstock supplies could actually shrink. 

Propylene demand grows with the economy, said Bob Bauman, president of Polymer Consulting International, a US consultancy. But without on-purpose propylene plants, the US market will unlikely get the propylene it will need, Bauman said.

US refineries produce much of the propylene used by the nation's chemical industry. However, refineries will have little incentive to increase production.

Demand for gasoline in the developed world should remain flat in the upcoming years because governments are mandating ethanol blending, and consumers are buying more fuel-efficient vehicles. Plus, environmental regulations are encouraging refiners to use more propylene to produce blendstock for gasoline, Bauman said.

"The refineries are not going to give up their propylene," Bauman said.

Meanwhile, the other major source of propylene in the US is producing less of the feedstock. The nation's crackers are moving away from expensive oil-based naphtha feedstock in favour of ethane.

Since ethane-based crackers produce no propylene, this switch to lighter feeds has tightened the market.

"The chain economics are definitely going to favour propylene," Bauman said. "One way or another, the US will need propylene."

Already, the US propylene market is tight, as reflected by recent prices for the feedstock.

US propylene contracts rose by 15 cents/lb ($331/tonne, €228/tonne) in April, setting a record.

The 20% increase, which stemmed from tight supply and firm demand, put polymer-grade propylene (PGP) at 87.50 cents/lb, topping the 85 cent/lb record of July 2008.

The settlement in April lifted chemical-grade propylene (CGP) to 86 cents/lb.

Because of the large price increase, a US propylene oxide (PO) supplier was said to have reduced rates by 10%.

PO production could be further reduced because of another possible increase in propylene prices in May, the source said.

Earlier this year, polypropylene (PP) buyers worried about demand destruction because prices had risen so sharply, the result of higher propylene costs.

Additional reporting by William Lemos

($1 = €0.69)

For more on propylene or PP visit ICIS chemical intelligence

By: Al Greenwood
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