Petrochemicals: global propylene demand recovers

12 March 2012 00:00  [Source: ICB]

Global propylene demand in developed regions is set to recover to pre-crisis levels by 2015 and will be supported by plans for additional capacity in China and eastern Europe, said Stewart Hardy, manager of ChemSystems Market Dynamics at US-based consultancy Nexant.

Growth for its main derivative polypropylene (PP) will average 3.8%/year and account for 65% of total propylene consumption by 2020. Other derivatives expected to perform strongly include propylene oxide (PO), cumene and acrylic acid with annual growth at 3.5%, 3.9% and 4.2%, respectively.

The improvement in demand since the start of the year follows the slowdown in derivative markets in the second half of 2011 caused by economic uncertainty and destocking. This is when PP growth halved and most other derivatives went into negative territory, said Hardy.

However, in view of demand recovery, high propylene values and the need to reduce PP imports, development of on-purpose propylene production is accelerating during 2012-2014 in Asia, and particularly in China where coal-based olefins investment is gaining momentum. Most developments are likely to come with new PP capacity.

Hardy said that coal-based production will account for at least half of the country's future propylene supply. Propylene capacity from methanol-to-olefins (MTO) or methanol-to-propylene (MTP) in China will reach 5m tonnes/year by 2016, with many more projects in development.

In eastern Europe, new capacity plans - including Russian oil major Lukoil's fluid catalytic cracker and Vostochnaya Neftechimichskaya's cracker complex, could add another 2m tonnes by 2017, transforming the region from a PP importer to a major exporter.

High demand growth for PO, mainly focused in Asia, will also bring more large-scale projects. For acrylic acid, projects in Saudi Arabia and Asia during 2010-2014 will increase global capacity by 20%.

Author: Elaine Burridge and Heidi Finch

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