Chemical Profile: Asia phthalic anhydride

29 November 2013 09:35  [Source: ICB]

USES
Phthalic anhydride (PA) is produced in two grades: flake (white solid) or molten (clear liquid). It has a characteristic, irritating odour, is slightly soluble in hot water, is hydrolysing to phthalic acid, and is soluble in alcohol and carbon disulfide. It reacts with strong oxidants and also reacts violently during heating with copper oxide or sodium nitrite, posing an explosion hazard.

 

The major outlet for PA is in the manufacture of phthalate plasticisers, which accounts for over half of production.

The main plasticiser in which it is used is dioctyl phthalate (DOP), which goes into polyvinyl chloride (PVC). The second-largest outlet is in unsaturated polyester resins (UPR), which are usually blended with glass fibres to produce fibreglass-reinforced plastics. The third-largest outlet is PA-based alkyd resins, which are used in solvent-based coatings.

Principal end-markets for PA are the construction, marine and transportation industries, and architectural, machinery, furniture and fixture applications.

Small-volume uses for PA include dyes, pigments, detergents, herbicides, insecticides, fire retardants and saccharin.

SUPPLY/DEMAND
Supply from South Korea and Japan has been tight in November, and the problem is expected to persist into January 2014.

In South Korea, supply is short after most cargoes for November shipment have already been sold out. A major South Korean producer said that its cargoes for December shipment are almost sold out and it would start accepting orders for January shipment in mid-December. Another major South Korean producer is also low on inventory after the recent completion of its plant turnaround on 11 November, and a third South Korean producer is not offering any export cargoes in November as it does not have any surplus stock to export.

The tight supply situation in Japan has eased somewhat as three of the four major Japanese PA facilities have restarted after their recent turnaround, a regional trader said, although a fourth Japanese PA facility is scheduled for regular maintenance from mid-November to early December.

On the demand side, market participants said that they have observed a slight softening of demand since October because of the seasonal lull in the downstream plasticiser industry. Demand tends to drop off going into winter because of the seasonality of some of its end-markets.

Buyers also tend to buy on a need-to-basis while producers were cautious not to pile up inventory stock as manufacturing slows down during the traditional year-end downstream lull demand period.

PRICES
Spot prices for phthalic anhydride (PA) in China and southeast Asia were stable-to-soft for the period of mid-August to mid-November, tracking feedstock orthoxylene (OX) prices, which fell from a three-month high in early August and has stabilised since mid-October.

Feedstock OX prices have been higher than PA prices in Asia for a year since October 2012, but the price gap has narrowed gradually since August and PA and OX prices are now on par with each other.

This unusual phenomenon of OX prices being higher than PA prices occurred because major upstream producers in Taiwan and South Korea have been producing more paraxylene (PX) as compared with co-product OX, as there is more demand for the former. This resulted in tight supply of OX which was being offset by relatively stable, albeit weak demand from downstream PA and plasticizers.

Moreover, because of the lacklustre demand, PA prices fell. However, as PA producers still needed to fulfil contractual obligations, it was inevitable for them to buy OX at higher prices.

TECHNOLOGY
PA was first made through the oxidation of naphthalene in concentrated sulphuric acid and in the presence of mercury sulphate. A catalytic vapour-phase oxidation of naphthalene later replaced this route. The latter process is done in air and in the presence of a vanadium oxide catalyst.

The process technology has changed little, although catalysts have a longer life of three years and yields have improved.

One developmental improvement was the lowering of the air-to-OX weight ratio to 9.5:1, allowing energy savings and reduced capital costs.

Today, most PA producers use OX, which has superseded naphthalene as the feedstock. Naphthalene-based PA is darker in colour and is not suitable for use in some pigment-related downstream products.

In Asia, naphthalene-based producers include all four Japanese producers, South Korea’s OCI and a number of Chinese producers.

The proportion of naphthalene to OX-based Chinese producers in terms of nameplate capacity in 2013 is 20/80. There is a sprout of new naphthalene-based PA facilities that started up in 2013 because of the price advantage of using naphthalene over OX.

Moreover, a few Chinese producers have converted their OX-based facilities to naphthalene-based in 2013. However, naphthalene prices have climbed by 20% in recent months so it is beginning to lose its competitiveness.

South Korea’s OCI, which has both OX-based and naphthalene-based facilities, is currently running only its naphthalene-based line. It has been mulling over plans to convert its two idle OX-based lines to run on naphthalene but soaring naphthalene prices is stalling their decision, a company source said.

Major PA producers in Asia include South Korea’s Aekyung Petrochemical, Taiwan’s Nanya Plastics and India’s IG Petrochemicals.

OUTLOOK
Most market players expect PA prices to remain stable until the end of the year as weaker demand at the year-end is being offset by tight supply in Japan and Korea on the back of stabilising OX prices.

PA prices are projected to continue to track feedstock OX prices closely in the year ahead. Two new OX plants are scheduled to start up in China in 2014 and the influx of new supply would most probably cap any substantial gains in PA prices in 2014.

Furthermore, two new PA plants are scheduled to start up in China in 2014. PA prices are expected to be stable-to-soft in the year ahead, as current market demand is unlikely to be able to absorb all the new supply. That said, the scale of any price decline is not expected to be too great as plants would cut operating rates to balance out the supply.

The global economy has been in the doldrums and downstream plasticizers demand has been relatively weak, albeit stable, throughout 2013, mainly due to the tepid construction sector. Demand would most likely tread the same path in 2014, unless a sudden economic recovery occurs.


By: Matthew Chong
+65 6780 4327



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