US Chemical Profile: Ethylene oxide

12 March 2012 00:00  [Source: ICB]

NA Ethylene Oxide tableUSES

Ethylene oxide (EO) is largely used to make monoethylene glycol (MEG), which accounts for three-quarters of global EO consumption.

The second-largest outlet is in surface active agents, including non-ionic alkylphenol ethoxylates and detergent alcohol ethoxylates. Other EO derivatives include glycol ethers (used in solvents and fuels), ethanolamines (used in surfactants and personal care products), polyols for polyurethane (PU) systems, polyethylene glycols (used in toothpaste, medicines) and polyalkylene glycols (used in antifoam agents, hydraulic lubricants).

SUPPLY/DEMAND

US supply of ethylene oxide (EO) increased by 6.4% in 2011 to 6.14m lb/year, up from 5.76m lb/year in 2010. Supply is expected to increase from 2012 through 2015 amid steady demand in downstream markets.

EO buyers and sellers report that EO supply is tight, amid a heavy spring turnaround season and an unplanned outage at BASF's Geismar production facility in Louisiana. Snug supply is expected to contribute to continued tightness in EO into April/May, according to buyers and sellers.

An unplanned outage at Germany-based BASF's 220,000 tonne/year Geismar plant significantly tightened availability of EO in early 2012. The company declared force majeure on January 2 because of an extensive mechanical failure of a critical piece of equipment.

The force majeure covered EO and EO-containing Pluracol products, including conventional and graft products, the company said in January. The force majeure was lifted on February 22, according to BASF.

With BASF's EO production back on line, availability should improve, although currently it is still constrained, sources said.

Feedstock ethylene supply is also tight, due to an unplanned cracker outage at the Flint Hills Resources plant in Port Arthur, Texas. Ethylene supply is expected to remain snug, as up to 12% of US Gulf Coast cracker capacity will be down in the second quarter during the spring turnaround season, sources said.

LyondellBasell has started maintenance at its Channelview olefins complex in Texas, market sources said. The company has two crackers at the site, each with 873,000 tonnes/year of ethylene capacity.

LyondellBasell shut down one of the units (OP-1) on February 29, sources said. The cracker is expected to be off line for seven weeks. The second unit (OP-2) is also expected to go down but only for two weeks, the company said.

PRICES

US EO values were assessed lower by 1.4 cents/lb for February to 56.00-65.50 cents/lb, as formula-based pricing is contingent upon the monthly ethylene settlement, which was finalized during the week ended March 2.

Formula-based prices for US EO are based mostly on monthly ethylene contracts.

Supply and demand contribute only marginally to US EO's price movement. It remains uncertain where the March ethylene contract will settle.

US ethylene contracts for February settled at 54.00 cents/lb, down by 1.75 cent/lb from January, pressured by lower production costs in recent weeks.

TECHNOLOGY

EO was first manufactured using ethylene chlorohydrin as an intermediate, but this route has been superseded by the direct oxidation of ethylene with air or oxygen.

Ethylene, compressed oxygen and recycled gas are mixed and fed to a multitubular catalytic reactor. The mixture is passed over a silver oxide catalyst at 200-300°C and 10-30 bar. The resulting gases from the reactor are cooled then passed trhough a scrubber where the EO is absorbed and can go straight to glycol manufacture or purified for other EO derivatives.

OUTLOOK

EO supply is expected to remain snug into April/May as producers build inventories and increase production following an active turnaround season. Meanwhile, demand in downstream markets is expected to be robust as the US polyethylene terephthalate (PET) sector ramps up output because of high demand ahead of the summer soft-drink bottling season.

The planned acquisition of US-based EO producer Old World Industries for $795m by Thai polyester producer Indorama Ventures, could affect the supply scenario in the US.

Indorama expects the transaction to be completed within the first quarter of 2012. Old World owns and operates a 355,000 tonne/year EO production facility at Clear Lake in Texas. Indorama said the acquisition provides a platform for growth in new products with higher margins, and an established production facility, customer base and supplier network.


Author: Leela Landress and Feliza Mirasol



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