Ethylene oxide (EO) is largely used to make ethylene glycol (EG), which accounts for three quarters of global EO consumption. The second-largest outlet is in surface active agents, including non-ionic alkylphenol ethoxylates and detergent alcohol ethoxylates.
Other EO derivatives include glycol ethers (used in solvents and fuels), ethanolamines (used in surfactants and personal care products), polyols for polyurethane (PU) systems, polyethylene glycols (used in toothpaste, medicines) and polyalkylene glycols (used in antifoam agents, hydraulic lubricants).
EO supply remains tight, despite the return of manufacturing plants in the second half of 2013 following major turnarounds in the first half of that year. The main reasons for the continued tightness are reduced operating rates by a major producer and the impending start of the downstream surfactants sector’s strong season.
A producer was said to have reduced its EO operating rates because the restart of Williams’s Geismar, Louisiana, cracker, from which it sources ethylene, was delayed to June 2014, two months later than anticipated. The new restart date also marks one full year since a fatal explosion at the site.
The anticipated pickup in demand from the downstream surfactants sector would run from March to June or July, which is the typical strong season for surfactants. Producers will not have enough EO to fulfill demand and the market will be, or has already entered, an oversold situation, according to market sources.
These factors follow an already tight supply situation that burdened the EO market during the fourth quarter, when the Evangeline Pipeline that delivers feedstock ethylene between Texas and Louisiana suffered damage and had to be shut down for repairs. The restart of the pipeline, initially slated for the end of 2013 or start of 2014 was delayed to March, market sources said.
Demand was also at a healthy level during the winter season as the downstream EG market was boosted by the longer than anticipated winter weather, which drove anti-freeze sales.
In China, heavy losses in the monoethylene glycol (MEG) segment is expected to drag down the prices of feedstock EO. In view of the fragile supply-demand fundamentals, a US producer said that it has decided to reduce its supply volumes to China in the coming months.
EO contract prices for February fell slightly from January following a decline in the feedstock ethylene contract for February.
The ethylene contract typically settles at the beginning of the month for the previous month, and EO contract prices move in tandem with ethylene on a formula-based correlation.
The majority of EO contracts are formula-based, and price movement comprises 80% of the change in the ethylene price and an additional conversion fee, or adder.
The February EO contract range is at 68.60-78.10 cents/lb ($1,512-1,722/tonne) free on board (FOB) from 69.20-78.70 cents/lb FOB in January, as assessed by ICIS. This represents a 1% decline from January.
EO was first manufactured using ethylene chlorohydrin as an intermediate, but this route has been superseded by the direct oxidation of ethylene with air or oxygen.
Ethylene, compressed oxygen and recycled gas are mixed and fed to a multitubular catalytic reactor.
The mixture is passed over a silver oxide catalyst at 200-300°C and 10-30 bar.
The resulting gases from the reactor are cooled then passed through a scrubber where the EO is absorbed and can go straight to glycol manufacture or purified for other EO derivatives.
EO supply tightness is expected to persist into the start of summer, driven by reduced producer operating rates and higher demand from the onset of the strong season for downstream surfactants.
With the anticipated restart of the Evangeline Pipeline, ethylene supply is expected to resume normal flow, which some sources said would ease some of the production restriction seen in the south-southwest region of the US.
In addition, demand from downstream EG is also expected to see a pick-up from the polyethylene terephthalate (PET) market, which has its peak season from March to about August. PET is a major outlet for EG.
Market sources said that no major plant turnarounds are planned for this year because producers conducted their major turnarounds in 2013.
Producers largely did not comment on any turnaround plans for 2014.
- Additional contribution from Trisha Huang