INSIGHT: The future of the aromatics industry by 2050

(recasts, clarifying PX growth figure in 18th paragraph)

By Rhian O’Connor

LONDON (ICIS)–Global megatrends are powering demand for high-performance materials, which should overcome some concerns about the petrochemicals industry, but increased use of oil for chemicals rather than energy will be needed in the future.

It’s that time of year when I should be writing outlooks for 2016. However, having just returned from the 14th ICIS World Aromatics and Derivatives industry conference and also re-reading the excellent book “The future of the chemicals industry by 2050”, by Rafael Cayuela, instead my thoughts are turning to the long-term future of the aromatics industry I love so much.

Aromatics are horrible chemicals; poisonous and carcinogenic. However, benzene and other aromatics are the starting point for a number of specialist materials that are changing the way both the developed and developing world lives.

These include specialist polymers such as polystyrene (PS), polycarbonate (PC), polyester and polyurethane (PU). According to one industry executive, 40% of chemicals, coatings and polymers are aromatic in origin.

BASF at its 2012 automotive investor day pointed to a 2012-2020 compound annual growth rate (CAGR) of 6% in engineering plastic use in automotive applications. This is driven by metal replacement and the need for lightweight safety conscious vehicles.

Polycarbonate, made from phenol using benzene, is increasingly being used instead of glass and in car bodies. But engineering plastics growth does not just depend on car use.

Covestro has an excellent case study of PC being used for the interior wall panels of railway trams in China. Even the futuristic Swegway hoverboard is made partly from acrylonitrile-butadiene-styrene (ABS).

Similarly in construction, high performance materials are making buildings safer, more temperate and eco-friendly.

Expandable polystyrene (EPS), made from styrene using benzene, is a lightweight filling material that, according to the British Plastics Federation’s EPS industry group, can reduce CO2 emissions by 50%.

Other insulation materials include polyurethane foams made from benzene.

Similarly, the clothing industry is increasingly turning to high performance fabrics such as nylon and polyester.

The growth of these fabrics in emerging market should be significant with Harish Davey, president, Strategy & Business Development at Reliance Industries, pointing to Indian population growth and increased saturation of polyester, previously considered a “rich-man’s fibre”.

As global population growth continues, land that is currently used for fabrics such as cotton may instead have to move to food production, according to a study published in the UK’s Guardian newspaper.

Kate Johnson, general manager of Shell Propylene Oxide and Derivatives business, stated that peaks in styrene demand coincide nicely with peaks in innovation, and innovation should continue to drive the aromatics end-markets.

One new development that may revolutionise manufacturing is the development of 3D printing, also known as additive manufacturing (AM). In this new model, designs are sent electronically and can then be built layer-by-layer in local workshops or repair shops.

This is already in use in the aerospace industry, and is widely talked of for the automotive industry. Even NASA are using it on their next space rover.

A number of different materials are being considered for 3D printing applications but most are thermoplastics made with aromatics for instance PC, ABS, nylon (polyamide), acrylonitrile styrene acrylate (ASA) or high-impact polystyrene (HIPS).

As a result of these mobility, urbanisation, environmental and innovation trends ICIS forecast benzene consumption to grow 55% from 2014-2030 and paraxylene (PX) use (for polyester) to grow a massive 100% over the same period.

So where will all this additional aromatics production come from? Aromatics really only come from two places – crackers and refineries. The pessimistic point to lighter cracking materials (shale gas), and lower gasoline consumption as limiting the potential for aromatics supply. To a large extent these factors will depend on the crude oil price, with lower naphtha and gasoline prices currently leading to a reversal of these trends.

I assume in the long-term lower investment in crude will lead to some tightening of supply and potentially increased prices. In this scenario cracker mixes should be lighter, with cheap US (and European?) shale gas driving limited growth in pygas [aromatics mix] production. In this case, refineries become the most viable long-term source.

But won’t trends to electrification of vehicles, ethanol use as fuel, increased pollution and (potentially) more expensive crude all lead to less gasoline production? Yes, but this doesn’t necessarily have to lead to less aromatics production.

A wise oil executive once said that burning oil for energy is like burning Picassos for heat, with the hydrocarbons within oil so valuable for materials. 30% of US gasoline is aromatics-rich reformate, according to ExxonMobil. Given increased demand for aromatics and lower demand for gasoline, this reformate should increasingly find its way into the high-performance materials we need.

To some extent, this is already happening. Shell last week, discussed a new aromatics investment in the Netherlands which will simply transfer aromatics from its Pernis refinery to the petrochemicals complex in Moerdijk.

Globally too, an increased focus on aromatics is envisaged. In the Middle East, the first wave of petrochemicals production was focused on ethane, a cheap by-product of the hunt for crude.

This was primarily made into ethylene and polyethylene. According to Stefano Zehnder from ICIS consulting, newer projects are more focused on refinery integration and a mix to a heavier feedstock slate.

This achieves government goals of diversifying from ethylene derivatives into a more sophisticated and higher value chain of downstream products, and also supports more labour intensive associated chemical parks.

However, the majority of new planned aromatics capacity is focused on Asia, and is driven not by benzene but by PX demand. Asian PX capacity is expected to increase 80% from 2014-2030, with 73% of global capacity in the region.

This growth is necessary to clothe the increasing and more affluent population. PX production often brings increased benzene as a by-product.

Toluene as well, will at some point in the future be used to produce high-value PX and benzene, instead of being used primarily as an octane-booster in gasoline.

Another factor that could produce more supply in the future is recycling. This includes domestic recycling of packaging, but more importantly industrial recycling as industries like automotive, fabric and construction focus more on end-of-life disposal of goods.

Policymakers are already highlighting this area. There are technical challenges with recycling complex materials like ABS, but these can be overcome.

The final aromatics supply source that, in my opinion, will not take off any time soon are bio-aromatics.

Biochemicals are not made from crude but instead from plant materials. This brings into focus again the food versus fuel/chemical/fibres discussion, with a growing population needing more food from scarce land.

Second generation biofuels/biochemicals made from plant waste may solve some of this problem, but are not expected to make a significant impact in my lifetime.