OUTLOOK '18: US propylene production set to expand in 2018

03 January 2018 16:14 Source:ICIS News

HOUSTON (ICIS)--With the start-up of a new propane dehydrogenation (PDH) unit and several crackers, propylene capacity in the US is set to expand during 2018, while downstream capacity remains steady.

Enterprise Products' 750,000 tonne/year PDH unit had been expected to start-up in September prior to Hurricane Harvey. Effects from the hurricane delayed the unit’s commissioning schedule, and the company had said it expected to start up the unit in November. While market sources have said that start-up activities for the unit had begun in late November, the company said in a government filing that start-up activities could continue into late January.

Aside from the delay in the PDH start-up, Hurricane Harvey in late August had caused multiple outages for propylene production from refineries and olefin units. Although many outages resolved in the weeks following the hurricane, several olefins units were offline into November and one into December.

Meanwhile, refinery operating rates remained below pre-Harvey average until late November, according to data from the US Energy Information Administration (EIA).

Following the production disruptions, inventory levels in late 2017 remained low compared to prior years. For the week ended 8 December, propylene inventories at 2.481m bbl were down from the prior year by 47% and down from the average of the prior five years by 32%, according to EIA data.

With production normalised following Harvey and with the ramping up of the new Enterprise PDH unit, inventory levels should recover in early 2018.

Additionally, the increased production of propylene from the new PDH unit, and increased production expected from new and planned ethylene capacity, could lessen the market's reliance on refinery-produced propylene. Currently, about 60% of US propylene is produced at refineries as a co-product of gasoline.

Most of this is refinery-grade propylene (RGP), which is purified to polymer-grade propylene (PGP) to be consumed in derivative markets.

The spread between RGP and PGP prices can vary, but has generally been 9-12 cents/lb ($198-265/tonne) in 2017. Increasing propylene production from non-refinery sources could widen the spread between these products.


Farther along in the year, additional production is expected due to a continuing wave of ethylene capacity expansion.

Three cracker projects that had been expected in late 2017 but were delayed by effects from Harvey, are now expected to start-up in early 2018. Another four cracker projects are expected to start up during 2018, two early in the year and two during the second half of the year.

Cracker projects Capacity Timing
Baytown, Texas
1.5m tonnes/year Expected early 2018
Previously expected end 2017
Chevron Phillips Chemical
Cedar Bayou, Texas
1.5m tonnes/year Expected Q1 2018
Previously expected end 2017
Lake Charles, Louisiana
370,000 tonnes/year
(restart of idled unit)
Expected early 2018
Previously expected end 2017
Formosa Plastics
Point Comfort, Texas
1.25m tonnes/year Early 2018
Plaquemine, Louisiana
500,000 tonnes/year Early 2018
Lake Charles, Louisiana
1.5m tonnes/year H2 2018
St Charles, Louisiana
1m tonnes/year H2 2018

The new crackers expected to come online in 2018 will be favouring lighter feedstocks, mainly ethane, which tends to produce less propylene than feedstocks like naphtha. However, ethane crackers still produce about 3% of propylene and the planned 7.62m tonnes/year of ethylene capacity could produce more than 200,000 tonnes/year of propylene co-product.

Despite the expected increase for propylene production during 2018, there have been no major capacity increases announced for derivative markets during 2018. This may lead to some lengthening for propylene as cracker projects come online.

However, strong consumption may keep propylene balanced in the first half of the year. Following multiple natural disasters in the US in 2017, demand for industries related to construction, furniture and vehicles is expected to be strong early in 2018.

Propylene derivatives - including propylene oxide (PO), butyraldehyde and acrylic acid - could see a significant demand boost in early 2018. PO makes solvents, resins and polyurethanes. Butyraldehyde makes oxo-alchools and plasticizers, and acrylic acid makes coatings.

Polypropylene (PP), which consumes about 50% of US propylene, may also receive a demand boost from expected recovery efforts as it can be used for automotive parts. However, high propylene prices in late 2017 have pushed up domestic PP prices. Further increases could lead to increased PP imports or inter-polymer substitution and could lower propylene consumption for PP production.

Major US propylene producers include Chevron Phillips Chemical, Enterprise Products, ExxonMobil, Flint Hills Resources and Shell Chemical.

Major buyers include Arkema, Ascend Performance Materials, Braskem, Dow Chemical, INEOS, Oxea and Total.


By Jessie Waldheim