China new PDH units may need to resell propane if delayed

21 April 2014 04:34 Source:ICIS News

Focus story by Fiona Zhu

A propane tankSINGAPORE (ICIS)--China’s new propane dehydrogenation (PDH) units that are scheduled to come on line in 2014 may be forced to resell their contracted feedstock propane cargoes if start ups are delayed, industry sources said on Monday.

Two of the plants – both located in Zhejiang province and with a 450,000 tonne/year capacity – are coming on stream sometime in the second quarter, while two other units in the same province with bigger capacities of 600,000 tonnes/year each will start production from June to the third quarter.

The biggest of the five plants starting up has a 750,000 tonne/year capacity and will come on line late this year. (Please see table below)

The combined propylene output from these five project is estimated at 2.85m tonne/year.

China is building up its propylene capacity in anticipation of increased demand from downstream sectors such as polypropylene and acrylonitrile, among others.

Two of the five companies that are planning to bring their PDH units online in the first half of 2014 may have to postpone startups because of typical delays associated with such big projects, industry sources said.

Delays may cause problems because most Chinese companies with PDH units under construction have already signed term contracts for feedstock propane supply, mainly in accordance with the scheduled startup time, market sources said.

An estimated total of 1m tonnes of additional propane contracts for the five new PDH plants have been signed for 2014 but if the startup is delayed these companies may have to offer propane in China’s domestic market or re-export it other Asian countries, industry sources explained.

“Chinese PDH enterprises have signed term contracts for large volumes of propane for 2014. If the term supply is offered to the market, the Chinese market may become quite chaotic,” said a source with a PDH enterprise.

However, some traders said impact on the market may not be substantial because not all the five units are expected to be delayed and even if some are delayed propane cargoes can be offered within China or else re-exported to other Asian countries.

These traders said the impact of such excess propane can also be mitigated by offering it for residential use of LPG (liquefied petroleum gas).

“China’s demand for imported LPG is being pushed up by shortages in residential LPG as more feedstock LPG is separated from residential fuel. Increased demand will be sufficient to consume imported propane if such feedstock is offered back to the market by PDH companies,” said a Chinese importer.

According to market sources propane market will only under pressure if the startups are delayed to next year, 2015.

China had its first PDH unit last year, with the start-up of Tianjin Bohai Chemical Industry Group’s 600,000 tonne/year facility in the fourth quarter.

The company imported 195,000 tonnes of propane in line with the start of operations at the PDH plant in the last months of 2013. The plant requires an annual propane feed of 720,000 tonnes.

CHINESE COMPANIES TO START UP PDH UNITS IN 2014

Companies

Unit Capacity
(’000 tonnes/year)

Expected Startup
Time

Term Propane Supply
scheduled to begin in

Supply Volumes

Sanyuan Petrochemical

450

June 2014

Late 2013

One 44,000-tonne cargo/month

Zhejiang Satellite Petrochemical

450

June 2014

May-June 2014

1 cargo/month

Haiyue New Material

600

June 2014

Q2 2014

2 cargoes/quarter

Yangzijiang Petrochemical

600

Q4 2014

October 2013

2 cargoes/month

Yantai Wanhua Group

750

Late 2014-early 2015

N/A

N/A

Total

2,850

 

Source: ICIS C1 Energy

 

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections

By Fiona Zhu