Chemical Profile: Europe propylene

15 November 2013 09:48 Source:ICIS Chemical Business

The primary outlet for propylene is ­polypropylene (PP), which accounts for nearly two-thirds of global consumption. Other ­important derivatives include acrylonitrile (ACN), acrylic acid, oxo-alcohols, propylene oxide (PO), and cumene. Propylene is also used to make high-octane gasoline blendstocks and can also be blended into propane.

The European propylene supply and demand picture so far in 2013 has been a much more balanced, stable affair than seen in 2012. Last year was frequently described as a rollercoaster because of the hyper-cautious approach to inventory levels amid heightened volatility in the upstream crude oil and naphtha markets.

Players had lost patience with the constant volatility and wished for more stability in 2013, even if the same issues such as a lack of visibility and uncertainties over the global economy remained.

In 2013, following a stronger than expected January and February because of restocking, a couple of unplanned outages and preparations ahead of a heavy cracker maintenance slate, the lowest months were March-May – surprising since the turnaround season was in full swing – but derivative demand was very much under pressure due to their lack of competitiveness in the global market.

However, while soft demand remains a feature of the European propylene market, supply constraints because of planned and unplanned cracker outages – as well as underutilised crackers in general – continues to mitigate this. Spot prices have remained at or close to the prevailing contract prices – minus a small discount usually that reflects the current soft but balanced and steady nature of the European propylene market.

Players remain concerned about economic conditions and moving into the year-end buyers are focused on keeping inventory levels low.

According to the Association of Petrochemical Producers in Europe (APPE), Western European (EU15 plus Norway) propylene consumption decreased to 14.198m tonnes in 2012 – 337,000 tonnes or 2.3% lower than in 2011. Propylene production decreased to 14.309m tonnes – 336,000 tonnes or 2.5% lower than in 2011.

Propylene production for January to June 2013 inclusive was about 7m tonnes – 2.5m tonnes or 27% less than in the same period in 2012.

In Italy, Versalis announced the reduction of capacity at its Priolo, Sicily cracker by the end of 2013. Belgium headquartered Total Petrochemicals closed its NC1 cracker in Antwerp this year – the smallest of three at the site. It also announced the closure of its cracker at Carling, France by the second half of 2015. Spanish producer Repsol said it would reduce propylene capacity at its cracker in Puertollano, Spain, to 65,000 tonnes/year by 2015 – the current nameplate capacity is 150,000 tonnes/year.

European monthly contracts for November have been agreed at €1,080/tonne ($1,459/tonne) FD (free delivered) NWE (Northwest Europe), down €30/tonne from October.

Apart from a couple of periods of heightened upstream volatility when contract prices dropped €130/tonne in two months, only to rebound €110/tonne, contract pricing has been relatively rangebound.

Spot prices have been trading close to contract levels all year aside from a short period in the first quarter. Polymer-grade prices have been largely holding at contract price minus a small 3-6% discount.

The two main sources of propylene are as ­by-products from the steam cracking of liquid feedstocks such as naphtha (the predominant route in Europe and Asia), and from offgases produced in fluid catalytic cracking (FCC) units in refineries. The remainder is produced using on-purpose technologies such as propane dehydrogenation (PDH) and metathesis. Smaller amounts of propylene can be obtained from cracking propane and butane.

The main on-purpose process is PDH, but this is economically viable only in cases where low-cost liquefied petroleum gases (LPGs) are available. US PDH capacity will offset the loss of steam-cracker propylene resulting from the advent of new ethane-based cracking capacity from shale gas.

US producer ExxonMobil and German ­engineering firm Lurgi have developed olefins interconversion technologies.

Methanol-to-olefins (MTO) technology – ­normally used to boost ethylene production – can increase the propylene yield to 45% of total output. Lurgi has also developed methanol-to-propylene (MTP) technology, which is in also use in China, where methanol is converted from coal to make propylene and PP.

France’s Total, working with US-based UOP, has developed an olefin cracking process that takes the heavier olefins from the MTO unit and converts them into lighter olefins – in particular propylene.

European cracker production remains vulnerable to closure due to lack of competitivity. Although about 2m tonnes of ethylene capacity has or will be closed by end of 2015, 3m-4m tonnes of capacity has long been regarded as being under pressure. Therefore further propylene capacity reductions from steam cracker closures are expected, but output could recover through higher operating rates at remaining crackers.

Additionally, a contraction is expected in propylene output from FCCs because of poor refining margins and gasoline oversupply. Western Europe is the only region that is not developing new capacity.

Extensive capacity development is under way in central and eastern Europe from 2016 via PDH and FCCs, which could bring in 2m tonnes of propylene by 2017.

Global consultancy Nexant Chemsystems estimates that global demand for PP will grow to around 65% of total propylene consumption by 2020. China and India are expected to generate more than 12m tonnes of PP demand from 2011-2020. Nexant Chemsystems estimates PP’s annual average growth rate at 3.8%, with derivatives acrylic acid (4.2%) and cumene (3.9%) also showing stronger growth when compared with oxo-alcohols and ACN. PP demand levels in western Europe however are expected to remain essentially flat.

By Nel Weddle