Chemical profile: Europe Cyclohexane

16 March 2017 21:57 Source:ICIS Chemical Business

USES

Nearly all cyclohexane (CX) is used in the production of nylon intermediates adipic acid (ADA), caprolactam (capro) and hexamethylene diamine to make nylon 6 or 6,6. Smaller outlets are as a solvent, a reaction diluent and in chemical synthesis. It is also a starting material to produce cyclohexanol-cyclohexanone (KA Oil).

SUPPLY/DEMAND

Supply in the European CX market remains at a tighter level, linked to a production issue at the end of 2016, a plant closure and a dip in imports at the start of the year.

Higher imports are required to balance the market, after the closure of SABIC’s Wilton, UK, facility in January 2017. The facility at Wilton has a nameplate capacity of 330,000 tonnes/year, according to ICIS data, but was thought to have been running at approximately 195,000 tonnes/year before the closure, according to market sources.

Following the price hikes at the start of the year, imports were expected to arrive later in February, boosting the supply level. There were some logistical difficulties in transporting CX in January due to the low Rhine water levels.

Demand is at a reasonable level, with consumption of CX from the downstream caprolactum (capro) market at a high level.

PRICES

The European contract price is mostly settled quarterly at a delta to benzene. The monthly CX contract price is composed of the sum of the monthly benzene contract price and the quarterly CX delta contract.

The European Q1 2017 CX contract delta was agreed at €132/tonne, an increase of €5.5/tonne from the Q4 2016 contract. The significant increases in the monthly benzene contract for the first two months of 2017 resulted in a sharp increase in CX prices. CX prices are at their highest level since the end of 2014, driven by feedstock volatility.

TECHNOLOGY

Most production is based on the catalytic hydrogenation of benzene, either by liquid- or vapour-phase methods in the presence of a highly dispersed catalyst or in a catalytic fixed bed. Processes differ mainly in the means of removing the heat of reaction. Minimum reactor temperatures are preferred for maximum benzene conversion and minimum CX cracking.

Most plants use reformer offgas, which yields benzene and large amounts of hydrogen by-product. Hydrogen and benzene costs are critical for manufacturing economics, with plants often located near large refineries where low-cost feedstocks are available.

OUTLOOK

The European CX market will become more reliant on imports in 2017 as a result of the closure of SABIC’s Wilton, UK, facility, leaving supply balance as the key talking point for 2017.

The looming closure resulted in a large amount of trading activity in 2016. Imports increased, and there was talk of spot being offered with a very high discount level in the summer.

2016 was expected to be the point of reckoning for the CX market, with a difficult trading year for sellers as players worked hard to cement relationships in readiness for the shift in 2017.

The question on everyone’s lips was where material is likely to come from to meet the demand in Europe.

There is potential for operating rates to be ramped up in Europe, with the excess capacity expected to be utilised after the shutdown. However, a large chunk of the deficit is expected to be filled by overseas product, especially from the US, making Europe more reliant on imports. At the start of 2016, CEPSA announced it would be reducing operating rates, cutting output by 50,000 tonnes as its Huelva, Spain, facility.

Although there has been no confirmation from the producer, once SABIC exits the European market there is expectation for production to be ramped back up.

BASF is shutting down 100,000 tonnes/year of its caprolactam (capro) production capacity in Europe, 20% of the total, within 18 months on the back of a difficult market environment, it said on 12 September.

After the shutdowns, BASF capro production capacity in Europe will be 400,000 tonnes/year.

The closure of Invista’s adipic acid plant in Orange, Texas, US, last year has also made substantial amounts of CX available.

At full capacity the facility produced 200,000 tonnes/year of adipic acid, which required 140,000 tonnes of CX.

Demand outlooks from buyers for 2017 are positive, with some seeing possible growth between 2-4%.

With the region becoming more dependent on imports, some buyers are concerned that shipping or weather issues could cause a short-term imbalance in the market.

There are also some concerns that with one less player in the market any production problems in Europe would hit the supply level quicker than before.

By Katherine Sale