21 November 2011 00:00 [Source: ICB]
The largest consumer of propylene oxide (PO) is polyether polyols, which are used to make polyurethanes (PU): this sector accounts for about 66% of PO consumption. The second largest derivative is monopropylene glycol (MPG).
Other uses are propylene glycol ethers, flame retardants, synthetic lubricants, oilfield drilling chemicals, butanediol (BDO), propylene carbonate, allyl alcohol, isopropanolamines, modified starches and textile surfactants.
Supply in Europe is now fairly balanced after a tight first half because of extended plant maintenances. Plant operating rates are reported to be in the low-90%. Demand is reported to have been much higher this year than in 2010. MPG had a strong season in quarter one because of the harsh winter in Europe. The de-icing sector is said to be building stock now in preparation for the seasonal pick-up in demand.
Consumption into polyols has been good, driven by continued growth in PU, particularly from the insulation and automotive sectors, although demand is said to be slowing slightly now amid the economic uncertainty and as companies focus on year-end stock control and cash management.
The BDO sector is said to be strong, driven by PBT and textiles. Growth overall in Europe this year versus 2010 is put at 4%.
After a seven-month long run of increases, European prices in the miscellaneous sector started to come under downward pressure in June-July because of lower propylene feedstock costs. Contracts have fallen continuously since then. The range for October contracts was €1,516-1,633/tonne, €8/tonne lower than September, and November contracts look set to follow the €55/tonne decrease in European propylene contracts.
For formula-related business, prices are expected to fall by €44/tonne in line with 80% of the propylene feedstock movement. For freely negotiated contracts, the picture is mixed. Buyers say the drop for formula-related business should be replicated on freely negotiated contracts. However, some sellers are talking of a smaller drop of about €30-40/tonne in the hope of improving margins.
The traditional route to make PO is either by chlorohydrin or epoxidation. A popular epoxidation process has been the propylene oxide/styrene monomer (PO/SM) route. However, it has the disadvantage of producing 2.25 tonnes of styrene for every tonne of PO. An alternative uses isobutene, which makes a tert-butyl alcohol coproduct that can convert to methyl tertiary butyl ether (MTBE).
Several PO-only processes have been developed that are said to be more efficient. These include cumene-hydroperoxide-based propylene oxidation with cumene recapture; direct propylene hydro-oxidation with oxygen and hydrogen; direct propylene oxidation with oxygen technology; and propylene oxidation using hydrogen peroxide (HPPO).
Demand in Europe is forecast to grow by 3-4%/year, driven mainly by polyols/PU. Growth in eastern Europe, the Middle East and Africa is higher at 5-6%/year.
Investment is focused in the Middle East and Asia. US-based Dow Chemical plans a joint venture project including PO in Saudi Arabia, with start-up in 2016. No new investment is planned in Europe. However, sources say capacity will be needed to meet demand from new downstream plants; this is notably from toluene di-isocyanate (TDI), used with polyols to make PU foam, for Germany's BASF and Bayer MaterialScience plants that are due to start up in 2014.
However, one producer expects that demand in Europe will stay much lower than production, with no need for additional capacity until at least the next five to six years.
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