Asia chemical profile: PO

22 November 2012 20:24  [Source: ICB]

USES

Propylene oxide (PO) is used as an intermediate for the production of numerous commercial and industrial materials, and its principle derivatives are polyether polyols, propylene glycol (PG) and propylene glycol ethers (PGEs).

POThe largest consumer of PO is polyether polyols, which are used to make polyurethanes (PUs): this sector accounts for approximately 60% of PO consumption in Asia. The second-largest derivative is monopropylene glycol (MPG), which accounts for approximately 20% of PO consumption.

Other uses are PGEs, flame retardants, synthetic lubricants, oilfield drilling chemicals, butanediol (BDO), propylene carbonate, alkyl alcohol, isopropanolamines, modified starches and textile surfactants.

SUPPLY/DEMAND

PO production capacity in Asia has generally increased in 2012, with SCG-DOW Group starting up its 390,000 tonne/year hydrogen-peroxide-to-PO (HPPO) plant in Thailand in early January and SK Chemicals upgrading the capacity of its HPPO plant in Ulsan, South Korea, by 30,000 tonnes/year to 130,000 tonnes/year. However, third-quarter supply was blighted by production hiccups and scheduled maintenance at PO plants in China and Singapore.

PO consumption is largely tied in with the making of polyether polyols, whose growth in demand is largely dependent on use in PU foam. PG is the second-largest consumer of PO, particularly for MPG. The PU foam industry in China typically experiences a peak season in the third quarter. However, lacklustre domestic sales of finished products that contain foam components, such as electrical appliances, furniture and automobiles, have had a profound impact on the foam manufacturing industry. Demand is expected to slow further amid the challenging macroeconomic climate and as companies focus on year-end stock control and cash management.

PRICES

Propylene oxide (PO) spot prices in Asia reached a quarterly peak of $1,670-1,750/tonne CFR China in late August because of high raw material prices and limited spot availability resulting from unexpected production hiccups at a few regional PO plants. In the weeks leading up to the third-quarter price peak, buying sentiment among PO buyers in China became increasingly fatigued and most buyers took longer to commit to fresh purchases because of high risk aversion.

PO spot prices started to fall around early September as PO buyers, who could not pass on full raw material costs to their own customers amid lacklustre downstream business conditions, adopted a bearish outlook. Prices fell to $1,550-1,650/tonne CFR China on 21 September and proceeded on a downtrend based on unsatisfactory sales performance among downstream polyether polyol manufacturers, hitting the quarter's lowest point of $1,450-1,510/tonne CFR China on 9 November.

TECHNOLOGY

POPO is traditionally produced via the chlorohydrin route or epoxidation. A significant amount of PO capacity in China is still based on the older chlorohydrin process. Plants that employ this technology are often integrated with chlor-alkali plants, which consume a large amount of power in making chlorine and caustic soda. Consequently, extensive effluent treatment is needed to handle the waste stream.

Several key producers in China employ the PO/styrene monomer (SM) epoxidation route. However, this has the disadvantage of producing 2.25 tonnes of styrene for every tonne of PO. Capital costs can also be relatively high.

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 HPPO.

OUTLOOK

The price outlook is weighed down by protracted weak demand from downstream polyether polyol producers. A fourth-quarter price hike is very unlikely, although producers' cost pressures will limit the extent of further falls.

Heading into 2013, a raft of new plants in China will keep supply abundant, despite the start-up of Dow's PG facility in Thailand in late 2012. New facilities scheduled to start up include Jinlin Shenhua's 300,000 tonne/year HPPO plant, China's first; Shandong Jinling's 100,000 tonne/year PO unit; and Sanyue Petrochemical's 80,000 tonne/year PO plant.

Players worry whether downstream PU demand in China will be able to absorb this extra supply. Demand is likely to grow at about 7% in 2013 in key end-use industries such as construction, automotive, furniture and electronics.


By: Ryan Yue
+65 6780 4327



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