Impact from China PDH start-ups seen kicking in from H2 2014

By Peh Soo Hwee and Yeow Pei Lin

SHANGHAI (ICIS)–The impact of new propane dehydrogenation (PDH) units in China on the Asia’s propylene market may kick in from the second half of 2014 as operations take time to stabilise and amid tight supply in northeast Asia next year, market sources said on Thursday.

 “Many people think the first half of next year should be okay but the second half could be volatile,” a China-based propylene end-user said at the sidelines of an olefins conference being held in Shanghai on 30-31 October.

Tianjin Bohai Chemical Industry Group started up the country’s first PDH unit in September 2013 but operations at the 600,000 tonne/year unit have yet to stabilise, market sources said.

The bulk of the propylene that Tianjin Bohai produces is expected to be allocated to its affiliate companies, with a small portion sold to the domestic market, they said.

In addition, at least 15 naphtha crackers in Asia are due for scheduled maintenance in 2014, and nearly half of the plant turnarounds are in Japan – a leading supplier of propylene to China, according to ICIS data.

This is expected to keep propylene supply snug despite the impending start-up of at least another three PDH units in China next year.

Polypropylene (PP) producer Shaoxing Sanyuan Petrochemical is expected to start up its 450,000 tonne/year PDH unit in Shaoxing, Zhejiang province, at the end of 2013 or first half of 2014, market sources said.

Acrylic acid producer Zhejiang Satellite Energy Co plans to bring on stream its 450,000 tonne/year PDH unit in Pinghu, Zhejiang province, during the first half of 2014. Both companies will largely feed the propylene feedstock to derivative units.

Ningbo Haiyue New Materials Co is also expected to start up its 600,000 tonne/year PDH unit in Ningbo, Zhejiang province, in the first half of next year.

The company is likely to initially sell its propylene to domestic customers as it does not have derivative operations, market sources said.

At the end of 2014, Yantai Wanhua Group also plans to start up a 600,000 tonne/year PDH unit in Yantai, Shandong province.

If the above projects come on stream successfully, this is expected to have an impact on propylene import demand into China, Asia’s largest spot market.

China imported around 2.15 million tonnes of propylene in 2012, according to market sources. The expectations are for import figures to remain close to or slightly above these levels this year but import volumes in 2014 could take a hit from the start-up of the new PDH units.

However, some producers, who have started preliminary contract negotiations for 2014, said appetite for imported propylene remains strong due to the start-up of new downstream plants in the country, namely in the acrylic and phenol-acetone sectors, next year.

“Our customers are requesting for more term volumes,” said a Japanese propylene producer at the sidelines of the conference.

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