Price and market trends: New on-purpose propylene plants may stabilise US market

07 December 2012 10:32  [Source: ICB]

As feedstock propane is derived from natural gas, on-purpose propylene could follow gas prices more than oil prices

US propylene supplies could become more stable if companies carry out plans to build several on-purpose propylene plants in the upcoming years, the head of Braskem America says.

Braskem became a major consumer of US propylene when it acquired five polypropylene (PP) plants in the country from Sunoco and Dow Chemical.

In recent years, the US market for propylene has become more volatile, said Braskem America CEO Fernando Musa.

Because of the advent of shale gas, US crackers have shifted to lighter feedstock, which reduced the production of propylene. As a result, refineries have become a more important source of propylene. However, refineries treat propylene as a by-product.

Recently, though, a number of US producers have announced plans to build on-purpose propylene plants.

Unlike other sources of propylene, these plants would rely on propane to produce the monomer. Moreover, the plants would be dedicated producers of propylene. This should help ensure that the propylene will be available when Braskem and other consumers need it, Musa said.

The propane dehydrogenation (PDH) plants could lead to a different pricing dynamic for propylene, Musa said. As propane is derived from natural gas, on-purpose propylene could become more dependent on gas prices, not oil prices. The plants could even bring more stability to prices, he said.

However, Musa warned that it is unclear what the ultimate effect the PDH plants would have on propylene pricing. That effect will depend on when the plants start operations, how they are operated and how the propylene is marketed, he said.

Some producers could use most of the propylene internally, Musa said. Other companies may back away from building new plants.

So far, PetroLogistics as well as Enterprise Products, Dow Chemical and Formosa Plastics have announced plans to increase on-purpose propylene capacity. Williams is considering building a PDH plant in Canada.

By: Al Greenwood
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