Braskem’s new US PP plant comes amid margin recovery

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HOUSTON (ICIS)–Braskem’s decision to proceed with a new polypropylene (PP) plant in the US comes as margins for the polymer have risen sharply from the single digits earlier this decade.

The Brazilian polyolefins producer announced the decision earlier on Thursday. It had been considering the expansion for more than a year.

Construction of the $675m project – known as “Delta” and billed as “the largest PP production line in the Americas” – is expected to begin mid-summer, with the final phase of main construction targeted for the first quarter of 2020.

The new plant will have a capacity of 450,000 tonnes/year.

Delta will be built in La Porte, Texas, where it will benefit from infrastructure already in place. Braskem has existing PP capacity of 354,000 tonnes/year in La Porte.

Braskem’s project comes during a drought of new PP capacity in North America. The company noted that the region has not had a new PP plant added since 2005.

In fact, it has lost capacity, with both Sunoco and Phillips Sumika shutting down plants. Those two plants represented a total of 565,000 tonnes/year of capacity.

The loss of capacity and the increase of demand helped increase PP margins, as shown in the table below. Margins are listed in cents/lb.

Source: ICIS
* Year to date

For naphtha-based integrated production, margins rose from 5.92 cents/lb ($131/tonne) in 2012 to 25.30 cents/lb so far in 2017. Margins based on PDH production have remained above 25 cents/lb throughout the time.

These margins are attracting other companies to consider PP projects. But so far, only one other one is moving forward.

REXtax is scheduled this year to restart two lines at its site in Odessa, Texas. Assuming continuous operations, the two lines have a total capacity of 438m lb/year (200,000 tonnes/year).

The table below summarises the various PP announcements. Capacity is listed in tonnes/year.

The project by Inter Pipeline is a legacy one that it inherited after acquiring the Canadian natural-gas-liquids business of Williams. Like the Pembina project, it would be integrated with a proposed propane dehydrogenation (PDH) unit. That unit would have a capacity of 525,000 tonnes/year of propylene.

Before these companies commit to PP projects, they will likely seek assurances that PP margins will remain elevated.

That will depend in part on propylene supplies.

The wave of new crackers starting up this decade will produce some propylene, even though they are ethane-based and will make predominantly ethylene.

In addition, companies are building PDH units. Dow Chemical started up its 750,000 tonne/year unit more than a year ago.

Enterprise Products will soon start up its 750,000 tonne/year unit in Mont Belvieu, Texas.

Formosa Plastics will build one in Point Comfort, Texas, with start-up planned for 2020-2021. Its capacity is 658,000 tonnes/year.

Image above: The drawing shows how the Delta line will look like. Source: Braskem

Additional reporting by Stefan Baumgarten