The Benzene Versus Propylene Debate

By John Richardson

SHELL Chemicals put an argument forward last week that polystyrene (PS) had regained ground from polypropylene (PP) as a result of expensive propylene.

And the petrochemicals major forecast a bright future for both PS and expandable polystyrene (EPS).

The blog pretty much always enjoys playing the devil’s advocate and so later on in this post we will suggest some challenges to the Shell view.

First of all, though, here is a bit of background and some of the details of the case put forward by Shell.


From Feast to Famine

As we have discussed before on the blog, C3s have become very costly as a result of the switch to lighter cracker feeds in the US, the predominance of gas as a feedstock in recent steam-cracker capacity additions and above GDP demand-growth for PP.

So expensive has propylene become that since the global economic crisis, PS has regained its cost position against PP, said Alexander Farina, Shell’s General Manager, Chemicals Strategy Development.

“Equally encouraging is that substitution of PS by PP seems to have reached a plateau, and estimates suggest global styrene demand will grow around 3% per annum to 2020,” added Farina in a speech to the 5th ICIS Asian Aromatics and Derivatives Conference, which took place in Singapore last week.

“Reports from Asia confirm that further PS substitution is no longer an issue.

“There are ongoing challenges for PS in North America and Europe, where perhaps up to one-third of each market could be vulnerable to PP, but only with increased investment in production capacity for the latter.”

“Substitution is not a threat to construction market-focused PS products – particularly insulation – where long-term demand outlook is good in both new build and refurbishment. There are other uses – such as snap-off multipacks for foods like yoghurts – where PS is clearly the material of choice.”

Farina, however, earlier in his speech painted a challenging picture for benzene pricing.

Benzene went from a feast of oversupply in the 1990s to a famine of an over-tight markets in the 2000s, he recounted.

The last decade marked the introduction of tougher regulations on benzene content in gasoline, leading to the closure of on-purpose hydro de-alkylation (HDA) capacity.

“Before 2005, on-purpose swing capacity could add 20% to other (global) benzene production,” he added

“Today, it is nominally about 4%, but practically non-existent.

“Back in 2005, a Shell colleague speculated on whether the severe reduction in swing capacity would – at some point – create the need for new, on-purpose benzene supply if incremental fatal supply remained unavailable.

“Well, to-date, it has not, and the jury is still out on if and when that may happen.”

This had left benzene supply very-heavily dependent on how reformers and steam crackers run, he added. C6 pricing is therefore often driven by the demand for gasoline and olefins rather than the demand for benzene derivatives.

“In combination with high and fluctuating crude prices, the knock-on effect has been to make benzene prices much more volatile,” he said.

And he added that current estimates were for benzene demand to grow by just over 3% per year with supply only increasing by about 2% per annum.

But despite these challenges, Farina said that the price of the feedstock would remain competitive.

His speech also pointed out the excellent insulating properties of EPS and how it could help reduce energy consumption. Better-insulated buildings had the potential to reduce global energy consumption by 20%, he said.


But just for sake of being miserable….

1.) What if new ethane-based crackers in the US ‘crowd out” liquids-based cracker investments elsewhere? Might this sharply reduce the projected growth in benzene availability?

2.) What if the legal wrangle over styrene being declared a carcinogen by the US Department of Health and Human Services leads to consumer goods made from PS being banned?

3.) What if the propylene supply issues that have caused the surge in C3 costs are resolved? Unlike in benzene, on-purpose production of propylene is becoming ever-more popular. For example, several propane dehydrogenation (PDH)-to-propylene projects have recently been announced in the US and China

4.) And most importantly of all, what if crude oil pricing becomes even-more volatile, causing problems for more than just benzene? As we will argue in Chapter 3 of our e-book, ‘Boom, gloom and the new normal – how Western baby boomers are changing global chemical demand patterns, again’, oil markets have become dysfunctional and represent a major risk to the global economy.

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