The largest consumer of propylene oxide (PO) is polyether polyols, which are used to make polyurethanes (PU); this sector accounts for 55-60% of PO consumption. The second largest derivative is monopropylene glycol (MPG) at 25-30%. The remaining 10-20% comprises of propylene glycol ethers, flame retardants, synthetic lubricants, oilfield drilling chemicals, butanediol (BDO), propylene carbonate, allyl alcohol, isopropanolamines, modified starches and textile surfactants.
Supply in Europe is now becoming tighter going into Q4 2013 after a chronic oversupply for most of Q3. MPG is receiving early demand from the de-icing sector after a particularly harsh winter season in late 2012 to early 2013. The de-icing sector is said to be building stock now in preparation for the seasonal pick-up in demand. Buyers, however, have said they are experiencing no difficulties in obtaining product but some were due to begin Q4 negotiations this week.
Consumption into polyols has started to pick up seasonally, driven by continued growth in PU, particularly from the bedding and furniture sectors, although increased demand is not felt by all players in the market.
The vast majority of PO pricing is formula-related in line with 80% of the monthly propylene feedstock movement. PO prices fluctuated at the beginning of the year, falling to €1,454-1,570/tonne in May, the lowest range since August 2012. Subsequently, prices firmed steadily as May/June is the seasonal plant turnaround period for propylene plants. September saw a larger than expected increase in prices as fears of a new war in Syria pushed crude prices up, creating a knock-on effect downstream.
For formula-related business, prices are now expected to fall by €32/tonne in line with 80% of the propylene feedstock decrease of €40/tonne in October to counterbalance the September increase inflated by the threat of military action, which has since eased. For freely negotiated contracts, both producers and buyers said there had been very little concluded in recent months. One buyer said it did not believe other buyers could achieve prices below the formula-related €32/tonne reduction at this point in time.
The traditional route to make PO is either by chlorohydrin or epoxidation. A popular epoxidation process has been the propylene oxide/styrene monomer (PO/SM) route. An alternative uses isobutene, which makes a tert-butyl alcohol (TBA) co-product that can convert to methyl tertiary butyl ether (MTBE). The PO/SM and PO/TBA processes are used by Lyondell Basell as they are two of the three most cost-effective production methods, along with chlorohydrin. However, The PO/SM method has the disadvantage of producing 2.25 tonnes of styrene for every tonne of PO.
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 propylene oxidation using hydrogen peroxide (HPPO) which has no co-products other than water. HPPO is becoming more popular, but Dow, the world’s largest producer of PO, have said they use the chlorohydrin and HPPO processes equally.
Demand in Europe is forecast to grow by 3%/year, driven mainly by polyols/PU and glycols. Growth in Asia is significantly higher at 9%/year with global growth projected at around 5%.
Investment is focused in the Middle East and Asia. Dow Chemical’s world-scale Sadara project with Saudi Aramco in Jubail, Saudi Arabia, is proceeding on schedule and on budget for a 2015 startup, with full production expected by late 2016. Saudi Hydrogen Peroxide, a newly created joint venture between Sadara Chemical (Sadara) and the Solvay Group (Solvay), has begun constructing one of the world’s largest HPPO plants. It will have a capacity of 300,000 tonnes/year and is scheduled to begin production in 2015.
Northern China producer Shandong Jinling Chemical started commercial production at its second PO unit earlier this year, doubling its annual capacity to 160,000 tonnes/year.
No new investment is planned in Europe, but sources say operating rates will be increased to meet demand from new downstream plants. This will come from increased demand for toluene di-isocyanate (TDI) for Bayer MaterialScience’s 300,000 tonne/year world-scale TDI plant at Dormagen; which is on track for start-up in the second half of 2014.