The dominant outlet for propylene is polypropylene (PP), accounting for around 63% of global propylene consumption. PP is one of the most versatile of the bulk polymers due to a combination of good mechanical and chemical properties. Hence its applications are very wide.
Injection moulded PP, the largest of the PP grades, can be used in electronic and electrical appliances, house wares, bottle caps, toys and luggage. Film grade PP can be found in the packaging of sweets and cigarettes, tapes and labels. PP fibres are used in carpets, clothing and the replacement of sisal and jute in ropes and string. Copolymer PP is used in car and truck bumpers.
The second largest derivative, acrylonitrile (ACN) is used in a variety of elastomeric polymers and fibre applications such as nitrile rubber, acrylonitrile-butadiene-styrene (ABS) resins and acrylic fibres.
Propylene oxide is used mainly in producing propylene glycol and in the polyols/urethanes industry where it is consumed in flexible and rigid polyurethane foams and for urethane elastomers.
Oxo-alcohols, such as 2-ethylhexanol and butanols, are used in intermediates for paints, adhesives and plasticisers.
Cumene, which is produced from propylene and benzene, is the main feedstock for the manufacture of phenol and acetone. They are used to produce a variety of products such as polycarbonate, epoxy resins and methyl methacrylate.
Acrylic acid is used in the production of acrylic esters and resins for paints, coatings and adhesives applications.
During the 1990s, PP demand grew at about 10%/year, outpacing the other major thermoplastics. Some of this growth was due to substitution of other polymers as PP was less expensive due to low propylene prices. Since then propylene prices have risen relative to other base chemicals and PP prices are now similar to other polymers. Growth in PP demand has slowed to an average of 5-6%/year.
Global propylene supplies tighten
Supply issues are the reason behind increasing propylene prices. Propylene was cheaper than other polymer feedstocks because it was mainly produced as a by-product of steam cracking to make ethylene and fluid catalytic cracking (FCC) producing gasoline.
However, propylene demand has grown quicker than ethylene demand and investments in new steam crackers have not provided adequate growth in propylene supplies. In addition, many of the steam crackers in the Middle East are based on an ethane feedstock that produces negligible propylene. More propylene can be recovered from refineries but this has become more difficult as investments in new refineries have not kept up with propylene demand.
Historically, propylene to ethylene price ratios in western Europe and North America have been in the 0.7 to 0.8 range. However, as the spare propylene capacity has been absorbed by the higher growth rates of propylene derivatives to ethylene derivatives, the price ratio has trended towards 1.0.
This price ratio increase, along with increased crude oil prices, has helped support the development of on-purpose propylene capacity, says US-based consultant CMAI. There are a number of projects using alternative on-purpose technologies, including propane dehydrogenation (PDH) and ethylene/butene metathesis. There are also a few projects looking at other technologies such as methanol-to-olefins (MTO) and methanol-to-propylene (MTP), high severity FCC and olefin cracking.
Capacity based on metathesis technology will be added steadily for the next few years while new technologies such as MTO are beginning to appear. In 2009, PDH and high severity FCC plants will account for nearly half of the new propylene capacity additions, according to CMAI.
In 2006, around 6% of global propylene was produced from on-purpose technology. CMAI estimates that 13% of global propylene in 2011 will be sourced from these plants.
A record increase in propylene capacity of over 6m tonnes/year will also occur in 2009, according to CMAI. Most of the propylene capacity is being added either in Asia to meet its high demand growth or the Middle East making the use of advantageous feedstocks.
Meanwhile, global demand for propylene will grow from 69m tonnes in 2006 to reach 88m tonnes in 2011, estimates CMAI. Asia will be the most significant consuming region for propylene accounting for 46% of global demand in 2011.
However, this growth in demand is unlikely to absorb initially all the capacity additions. CMAI expects that the tightness in the global propylene supply/demand balance will continue in 2007 and 2008. The tightness will disappear in the 2009-2011 period when the propylene market will enter a structurally weak period although this will depend on the timings of new project start-ups and the operating rates of the on-purpose plants. How producers intend to run their on-purpose propylene plants along with long-term reliability will have an impact on propylene volatility, comments CMAI.
European demand grows slowly
In Europe, propylene production fell in 2006 following a strong performance in 2005. Production statistics from the Association of Petrochemical Producers in Europe (APPE) showed propylene output in western Europe increased from 15.19m tonnes in 2004 to 15.53m tonnes in 2005 before falling back to 15.35m tonnes in 2006.
Long term propylene demand in Europe is expected to grow slowly. However, there will be very little investment in new steam cracker capacity in Europe, limiting future propylene availability from this source. There will be some interest in refinery propylene and alternative technologies but these investments will be limited due to the slow growth in demand. By 2009, CMAI predicts that West Europe will become a net importer of propylene and propylene derivatives.
In North America, propylene demand has been slowing. Historically, the region has exported 10-20% of its domestic production in the form of propylene and its derivatives. CMAI expects North America to continue to be an incremental supplier of propylene and derivatives but to a lesser degree.
High feedstock costs will make the North American ethylene industry reluctant to invest in new steam cracker capacity, limiting additional propylene availability here. However, there are untapped reserves of propylene in refineries and some expansion plans for existing refineries to meet the growth in gasoline demand could increase propylene availability.
China drives Asian markets
Demand patterns are quite different in Asia compared to the mature markets of Europe and America. Propylene demand growth continues to be strong in Asia and driven by China which is expected to account for three quarters of the total Asian growth over the next five years.
Growth rates for PP in Asia will be strong, estimated by CMAI at 7.1%/year in the 2006-2011 period. This will give an overall propylene demand growth for the region at 6.4%/year for the period.
Large additions in propylene capacity will be made in Asia with 2009 and 2010 appearing as record years for the region. China has the major increases in capacity with many steam cracker and metathesis projects. CMAI estimates it will add 3.5m tonnes/year of propylene capacity in the 2009-2011 period. China is also embracing MTO technology based on coal with a number of projects under consideration.
Capacity increases are planned in other Asian countries. South Korea will have a number of steam cracker expansions while Reliance of India will bring on-stream a huge high severity FCC unit in 2009-10. Thailand will also start adding capacity from 2009.
Historically, Asia has obtained new supplies of propylene from naphtha-based steam crackers in the region but future propylene demand in Asia will also have to be met by on-purpose technologies. CMAI estimates that on-purpose propylene capacity in Asia will grow from only 1.3m tonnes/year in 2004, equivalent to 5% of total capacity, to 4.8m tonnes/year by 2011, around 13% of capacity. Most of these investments will be in metathesis technology with 12 plants operating in Asia by 2011 but will also include high severity FCC units and MTO plants.
Asia is also a major importer of propylene and propylene derivatives and this will continue for the next five years despite the many capacity additions. In 2006, equivalent imports of propylene into Asia were 2.8m tonnes, representing to 9% of propylene demand. CMAI forecasts that by 2011 equivalent imports of propylene into Asia will be 5m tonnes, representing 12% of demand.
Middle East to become major player
With many of the Middle East petrochemical projects in the past based on ethane crackers only producing ethylene, additions to propylene capacity in this region have been minor. However, this will change from 2009 when the Middle East will become a more significant player in the global propylene market.
Much of the propylene will be converted to PP, mainly for export with Asia the target market. CMAI expects the Middle East to move from a slight net importer to a large exporter as capacity comes on-stream from 2009.
Saudi Arabia dominates the capacity additions with most of its projects starting up in 2008 and 2009. While some of the new propylene capacity will come from five steam cracker projects, three PDH plants are also being built. In addition, there is a metathesis project at Jubail and a huge high severity FCC plant being built at Rabigh.
In other Middle East countries, Iran is adding propylene capacity at its delayed Jam Petrochemical steam cracker project at Assaluyeh, due on-stream in early 2008. Borouge plans to start-up a huge metathesis unit in Abu Dhabi during 2010.
(Updated: July 2007. Sources: CMAI World Petrochemical Conference, Houston, Texas, 21-22 March 2007; ICB Chemical Profile, 26 June 2006.)