25 April 2011 22:33 [Source: ICIS news]
(adds words "Dow's", "and", paragraph 8)
By Al Greenwood
HOUSTON (ICIS)--US-based Dow Chemical is building its on-purpose propylene plant as a strategy to ensure reliable feedstock supply for its downstream products, a consultant said on Monday.
Dow is also considering a second propylene plant with a possible start-up in 2018.
Dow made the announcement at a time when US propylene prices have reached record levels.
Propylene is a feedstock for acrylates as well as for polyether polyols, which, in turn, are used to make polyurethane.
An on-purpose propylene plant would use propane as a feedstock to produce solely propylene. Most of the propylene in the US is produce as a byproduct - either by naphtha crackers or by fluid catalytic crackers at refineries.
At the same time, refiners are becoming less willing to supply propylene to the chemical industry. Refineries use propylene as a feedstock to produce alkylate, an octane-boosting blendstock for gasoline.
"When it comes to [Dow's] propylene derivatives, there is a real concern that this price premium has affected the acrylates business [and] the polyurethane business," said Bill Tittle, principal and director of strategy for the Americas and Asia at Nexant.
"They want to protect their acrylates business. They don't want to put that at risk because of uncertainty of propylene supplies," he said.
"Those are very valuable businesses in terms of their downstream derivatives," Tittle said. "Dow certainly wants to protect that."
Several long-term trends are constraining future supplies of propylene.
A growing proportion of US crackers have switched from naphtha to ethane feedstocks. Unlike naphtha, ethane crackers do not produce propylene.
Meanwhile, US gasoline demand is expected to remain flat for several years, meaning that refiners will unlikely increase capacity.
Refineries are a major source of propylene in the US, supplying about 60%.
At the same time, refiners are becoming less willing to supply propylene to the chemical industry. Refineries use propylene to produce an octane-boosting blendstock for gasoline.
Regulations have discouraged the use of other octane-boosting blendstocks, such as benzene and methyl tertiary butyl ether (MTBE).
Already, rising propylene prices are affecting margins for downstream products.
US-based paints and coatings producer Sherwin-Williams said higher propylene was contributing to an overall increase in its raw-material costs.
Because of the large price increase for propylene, a US propylene oxide (PO) supplier was said to have reduced rates by 10%.
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