Propylene And the Law Of Unintended Consequences

Will this year’s K-Fair see some major announcements to take advantage of the relative fall in ethylene costs?

K-Fair%20Logo.jpgSource of picture;


By John Richardson

THE rise in the price of propylene relative to ethylene is exercising the minds of senior executives in the polypropylene (PP) industry.

As fellow blogger Paul Hodges highlighted earlier this month in a post on this subject, C3s have moved from being a disposal problems in the 1970s through heavy investment in PP technologies.

Ethylene and benzene were in tight supply, and therefore polyethylene (PE) and polystyrene (PS) more expensive, adding a further push to PP innovation. 

This investment led to demand growth for propylene at 1.2 times global GDP (gross domestic product) by the mid-2000s compared with 1.0 GDP for ethylene.

But just as we have seen with the shale-gas revolution in the US that has transformed the economics of the country’s PE industry, tipping points can be reached and surpassed before you even know it.

So is the case with PP where greater consumption of the polymer, along with other propylene derivatives, and reduced refinery and liquids cracker operating rates have inverted traditional price relationships.

As Paul points out in his article, the solution to expensive C3s relative to ethylene could come from on-purpose propylene, but a senior Singapore-based source with a global poylolefins producer told the ACC blog yesterday:

“A problem with the propane dehydrogenation-to-PP process is that it is extremely difficult to operate and expensive because although propane and butane is supplied at a discount in Saudi Arabia, it is still a discount from a market price (Note from the blog: 28% off the prevailing CFR Japan naphtha price. This is unlike ethane which has been traditionally priced based only on the costs of separation and distribution as it has had no alternative value – although this is changing)

“Bio-based propylene production has yet to be proven and the Chinese government has also closed the door on coal-to-olefins projects (Note again from the blog: over-investment has led to restrictions on new projects. A tougher approvals process is also the result of lower oil prices and concerns over the environment).

But PP is by far the biggest derivative of C3s and so this will limit the upside for propylene as PP is a pure commodity. Once prices reach a certain level, and we are already seeing this, PP will be replaced by high-density PE (HDPE).”

Right now of the three major grades of PE, HDPE is suffering the most from oversupply because of big new capacities, polyolefin traders tell the blog.

So perhaps we are about to see some major innovations in PE to take advantage of longer ethylene markets.

The blog has heard that big announcements on new PE technologies are expected at this year’s K-Fair.

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