Chemical Industry Summary
The US political election in November resulted in an outcome that was not predicted by most polls, with Republican Party presidential candidate Donald Trump winning a majority of the electoral college vote and becoming president elect. This election has widespread ramifications for the US chemical and energy industries, as important branches of the US government including the Department of Energy, the EPA and others are expected to adjust policies and regulations that support growth and are seen by many to be pro-industry. The Clean Power Plan is likely to be scrapped and the government’s war on coal, which had a tenuous legal basis, will likely be halted. The Keystone XL pipeline approval will likely be a premature action taken by Congress providing US refiners access to Canadian tar-sands crude oil via a 1,700-mile pipeline. Actions to lower the ozone standard for air quality to 70 parts per billion will likely be reassessed. Another area that will be the focus of the new administration is trade policy that will result in the shelving of the proposed Trans-Pacific Trade Agreement proposal. Existing trade agreements such as NAFTA will also be reviewed in due course but are less likely to be a day-one priority. Trade agreements and potential modifications are important to the trade-heavy global chemical industry. There are significant global concerns that a global trade war could cool the emerging positive economic signs that are being seen in the US, Europe, and Asia.
Macroeconomics and Geopolitics
Americas
The ‘pro-growth ‘legislative agenda for the US is currently being developed and the US stock market has reacted positively. However, it is early, and the policies presented during the election cycle were highly non-specific. The initial estimate for US GDP in the third quarter came in at 2.9%, 0.3% above the consensus estimate of the Conference Board. The full-year growth of the US economy in 2016 is expected to be only 1.4%. With a Q2 growth of 1.4% and a Q1 growth of only 0.8%, the US economy is still recovering from as low start to the year.
The US jobs report for October came in at 161,000 jobs added, near the September report of 156,000 jobs added. Now that the election season is over, the Fed finally is ready to raise interest rates in the scheduled December meeting. Some observers had predicted a series of four interest rate increases in 2016, but the slow growth of the US economy and tame inflation supported the delay in raising rates.
In September, the US manufacturing PMI index improved to 53.4, the best reading in a year. Higher orders, low inventories, improved manufacturing employment, and increased order backlogs for manufacturing were all directionally positive. In October, US auto sales of light cars and trucks were 17.9 million units, up and at their highest level of the year. On a year-to-date basis, US auto sales are up only 0.3%.
US housing starts eased in September to 1.47 million on a seasonally adjusted basis, down 9% from August and down 13% from a year ago. In its November forecast, the NAR (National Association of Realtors) reduced its forecasted housing starts by 2%, at an annual rate of 1.16 million for 2016, up 4% from last year. For 2017, the NAR forecast has been trimmed to 1.26 million starts, up 5.3% from its 2016 forecast. Average prices for existing home sales in September was $234,200which is up 5.0% from last year.
Mexico’s PMI in October of 51.8 was nearly flat with September, a month that represented a 4-month high and improving orders. Production volumes were the highest in five months. Canada’s PMI of 51.1 recorded in October was in expansion territory but continued the trend of weak manufacturing performance.
Brazil’s manufacturing sector was still strongly in contraction territory, recording a PMI of 46.3 in October, the 21stmonth in contraction territory. The Brazilian economy remains in recession. In its October forecast, the IMF expects Brazil’s GPD to fall 3.2% in 2016, following a 3.8% drop last year. The IMF does not expect a return to 2% growth until 2019.
Europe
Implementation of Brexit referendum continues to present many unknowns for the UK, but Prime Minister Teresa May continues to state that there will be no wavering from this mandate. The British Pound is at a multi-year low in mid-October, trading at US$1.22=1£. The timing and extent of the exit (perhaps a “hard exit”) will evolve in the coming months as trade and other agreements are negotiated. In the US, the Trump campaign has indicated that it will seek an independent, favorable trade agreement with the UK.
The Eurozone’s manufacturing sector activity gained positive momentum in October and the composite PMI for the region was reported at 53.5, up incrementally from the 52.6 in September. Manufacturing activity in Germany continues was particularly strong with October registering a PMI of 55.0, a 33-month high. The October PMIs for Netherlands (55.7), Austria (53.9) and Spain (53.3) all represented high points for the second half of 2016. France reported a PMI of 51.8 which qualified as a 31-month high. Greece slipped back into contraction with a PMI of 48.6, representing a 5-month low.
Manufacturing activity improvement in Eastern Europe is somewhat mixed, but improving incrementally. In October, Russia’s PMI improved to 52.4, a four-year high. For October, Poland’s showed neutral growth with a PMI of 50.2, barely in expansion territory after a 26-month run of positive growth.
Asia
China’s manufacturing sector is showing incremental improvement and has crawled back into modest expansion territory. The October PMI index was recorded at 51.2, following a September PMI index of 50.1. This was the third positive month following a 9-month period of manufacturing contraction. China’s auto production in September was 2.53 million vehicles, up 13.3% from the same month in 2015. With the last three months showing improved production and sales, 2016 is shaping up to be a rebound year for Chinese autos with the growth of both indicators up 13% on a YTD basis. Other countries in SEA have, in total, indicated weakening manufacturing activity. Indonesia, Malaysia and Singapore turned in October PMIs in the mild contraction territory, marking several month lows.
Asian commodity prices have been relatively flat this summer but have begun to soften following the recent trend of weakening global oil prices. Far East Asian HDPE blow modeling prices have recently been in the range of in the range of US$1,100 to US$1,125/metric ton (MT), nearly flat from the beginning of summer. Ethylene prices in SEA are currently near US$940/MT, down US$100/MT in the last month and US$140/MT in the last ten weeks reflecting improved availability. In the last month, spot propylene in SEA has eased US$50/MT to near US$730/MT following crude pricing and an improved market balance. The spread to polypropylene has moved up US$100/MT in the last six weeks to near US$300/ton with PP trading near US$1,050/MT. Chinese propylene prices have been volatile in October, recently eased to near US$800/MT.
Feedstock – Crude Oil
All eyes are on the scheduled annual meeting of OPEC oil ministers in Vienna that is scheduled to begin November 30th. The anticipation of coordinated production cuts by OPEC members and Russia had driven prices to above US$50/Bbl.by early October. However, for October, OPEC set another production record, pumping out 33.8 million barrels of crude oil per day, above the suggested supply ceiling range of 32.5 to 33.0 million barrels per day. Increased crude oil production was seen from Nigeria, Iran and Iraq. A targeted production cut of 700,000 barrels per day was discussed by OPEC producers, but as of yet there is no executable plan as to how this target would be achieved. In fact, September’s production by OPEC was at a record level of 33.64 million barrels per day, up 1.3% from August’s 33.2 million barrels per day. The need for crude production cuts is generally acknowledged, but coordinated industry efforts by nations with diverse national interests involved cannot be easily achieved. Even with production cuts, record global inventories will prevent re-balancing before late 2017.
As of November 11th, WTI spot prices in the US were below US$44 per barrel, down 15% from mid-October highs. For the week ending September 30, US crude inventories not in the SPR (Strategic Petroleum Reserve) totaled 482 million barrels, flat with last year, and down 4% from a month ago. US crude production for this same week as estimated by the DOE at 8.52 million barrels per day, down 7.0% from 2015, but relatively flat with production levels seen in the last four months. Current US crude oil production is down 12% from the peak production of 9.6 million barrels per day seen in July 2015. However, recent record OPEC production have offset any global gain from reduced US production.
For the week ending November 4, Baker Hughes reported that the US oil-directed rig count increased by 45 or 8% from last month’s number to 569. Since the beginning of May of this year, the oil-directed rig count is up 40%. Including gas-directed rigs, the total rig count of 569 is also up 40% from the May-2016 low of 404. That number represented the lowest count since this indicator was started in 1991. The percentage of oil-directed rigs continues to hover near 80%.
Feedstock – Natural Gas & NGLs
From mid-October to mid-November, US natural gas prices have softened by nearly US$1.00/MM BTU. Henry Hub gas prices have recently approached US$2.00/MM reflecting peak underground storage conditions. This drop reflects the fact that inventories at the end of the third quarter to now have been above their 5-year maximum levels, and above record storage levels for this time of the year. Recent gas storage is at approximately96% of capacity. For the US, average temperatures have been higher than seasonal norms for all areas of the county and are now as much as 14-16°F higher than normal in the mid-continent area. The start of the withdrawal season has been delayed, and the most recent two weeks have seen over 50B SCF of additional injections.
For the last several years, US ethane prices have trended towards a BTU-parity basis with natural gas. This is due primarily to the abundance of ethane that has required re-injection of ethane into the natural gas supply. Thus, there is downwards pricing pressure on ethane that has recently dropped below 20cents/gal, and is unlikely to improve until US natural gas strengthens.
For the week ending October 28, the EIA reports that US propane/propylene inventories were 101 million barrels, down 3.0% from last month, and down 1.5% from a year ago, a period that represented peak inventory levels. Inventories are trending down reflecting the beginning of the heating season. Spot prices for propane are currently near US$0.51/gallon, up about $0.10 per gallon from last year, reflecting better export volumes and flat year-on-year crude oil prices.
US Olefins & Polyolefins
With both crude oil and natural gas prices easing over the last few weeks, the US oil-to-gas price ratio has eased upwards to a range of 18:1 to 22:1. The ratio is well above the 8:1 economic equivalent level, but well below peak levels that hit high marks of over 40:1 in 2013. The North American cracker economic advantage has been trimmed, but the US is still the second-lowest cost ethylene producing region.
US contract ethylene prices for October settled down 0.25cents/lb. and resulted in a net transaction price of 32cents/lb.for the month. This upwards movement trended with spot prices that moved down about $0.05 per pound during the month, and have continued to soften into the low 20’s by mid-November. This softening reflects both feedstock movement and the improved availability following the end of the peak cracker turnaround season.
US propylene prices settled down 1.5cents/lb.in October with contract pricing at US$0.40 per pound for chemical grade and US$0.415/lb.for polymer grade. US contract butadiene prices moved up sharply in November, up 7cents/lb.to 57cents/lb. The cumulative increase for butadiene has been near 10cents/lb.in the last three months.
Ethylene cash margins for US light crackers improves about 3cents/lb.for the third quarter, to a level of 17cents/lb.(US$375/MT). This margin improvement was reflected in the third quarter segment results for Westlake Chemical, Lyondell Basell and Dow Chemical.
US contract PE prices rose 5cents/lb.in September, an additional 4cents/lb. nominated increase in October failed to gain any traction. There are some reports that suggest that some US PE producers have rolled back contract PE prices 3cents/lb.in November, and CMR expects that this will softening will become industry wide. The softening of crude prices in the last two weeks and the decrease of US ethane prices for the last 30 days to below 20cents/lb.has undercut any PE price increase initiatives but has helped support integrated PE margins.
US exports of PE in September of 392 thousand MT were down 9% from last year due to a strong turnaround season and limited availability. Producer inventories of PE in the US are at a relatively low level. On a YTD basis, net exports are up 10% from a year ago reflecting the first half of 2016 outperformed2015. Total export volumes from the US represent 27% of industry capacity.
US polypropylene exports are down 25% from a year ago, reflecting a surge of imports in the first half of the year. In September, PP imports of 15,500 MT was equal to the August amount and was about one-third the level of imports seen in February/March.
Contract prices for US PVC increased by 2cents/lb.in October, half of the proposed 4cents/lb.increase. However, an increase this late in the year is not common. This increase follows three consecutive months of flat settlements. The current benchmark price for pipe grade PVC is US$0.74 per pound. Thus far in 2016, contract PVC prices have risen acumulative 10cents/lb. However, the recent softening of ethylene prices is not supportive of PVC pricing.
After increasing 3cents/lb.in September, US general purpose polystyrene prices appear to have settled flat in October, with the contract benchmark near US$0.95/lb. Prices for US contract benzene for October and November were down a cumulative 27cents/gallon to a benchmark price ofUS$2.22 per gallon.
European Olefins & Polyolefins
For November, European the contract ethylene price was up €30/MT to a level of €970/MT. This is the highest level since August of 2015. Spot prices for ethylene in Europe have softened about US$100/MT in the last six weeks from near US$1,000/MT to near US$900/MT. Contract European propylene prices were up €30/MT in November, at a level of €755/MT. Spot propylene prices in the last six weeks have been relatively flat at near €650/MT.
European contact butadiene pricing for November was up €80/MT to a level of €720/MT. This is the third consecutive monthly increase with the cumulative amount up €135/MT.
The European benzene contract price for September was up €6/MT to a level of €603/MT. Spot benzene has been steady, trading in a range of US$675 to US$700/MT in the last six weeks.
From August to mid-October, polyethylene prices in Europe have remained relatively flat. HDPE injection molding grade for NWE remains around US$1,200-1,210/MT on a spot basis. LLDPE in NW Europe has recently traded near €1,150 per MT, down about €50/MT in the last six weeks.
Global Chlor-alkali
The US Chlorine Institute reported that the effective operating rate for US chlor-alkali in September was 84%, flat with August and June, and down 3% from July. In response to industry-wide price increase announcements for US caustic, the industry has reported that actual prices have risen for seven consecutive months, although at a pace lower than anticipated. Announced increases of US$40/short ton (ST)in July and US$10/ST in August were partially implemented in Q3. With price protection typically seen in the industry, the remaining portion of the increases will likely be implemented in the fourth quarter and into next year. Other positive industry developments include higher export prices of caustic and the reduced availability of caustic exports from China.
Eurochlor recently reported chlorine production numbers for September, with production of 752k MT down 4.4% from last year. Operating rates dipped below 80% in September at 78.9%. YTD chlor-alkali production is running 3% behind 2015.
With recent industry announcements that include two more conversion projects, CMR has refreshed its view on impending European mercury cell capacity shutdowns. CMR believes that 31% percent of mercury capacity will be shut down, representing 8% of total European capacity. Only 10% capacity of remaining mercury cell plants is undecided at this point, representing 3% of European industry capacity. 60% of mercury cell capacity will be upgraded to membrane technology. Last year, the EC mandated deadline to get out of mercury cell capacity was moved from 2020 to 2017.
AMERICAS
Braskem to select UNIPOL process for Texas PP project
Braskem and W.R. Grace have signed licensing agreement for UNIPOL PP technology to be used for planned polypropylene (PP) facility in LaPorte, Texas. The PP facility is designed to have production capacity of 450KTAwith scheduled start-up in early 2019.
Comments: The amount of propylene produced from steam crackers in the US has been decreasing due to the increasing percentage of ethane in the feedstock mix. This led Braskem America to purchase propylene splitter from Sunoco in 2010 and secure a reliable source of feedstock for its existing PP plants in the US. Due to shale gas boom, abundant and low-cost gas liquids will be converted into on-purpose propylene and then polypropylene. Currently, there are eight PDH plants announced/planned in the US, aiming at growing demand for on-purpose PDH. Braskem has also reached a deal with Enterprise Products to buy propylene from their PDH plant in Texas. The new PP facility in Texas will enable Braskem to take advantage of on-purpose low-cost feed stock while meeting demand growth for PP in North America in years to come.
Dow’s Texas cracker on schedule to start up in mid-2017
Dow Chemical is currently 85% mechanically completed on its 1,500KTAcracker in Freeport, Texas. The cracker remains on track to become operational in mid-2017.
Comments: Shale gas boom has changed a competitive landscape to petrochemical producers in the North America. Currently, there are a dozen of ethane-fed cracker projects in a various stage of completion in the United States with all be operational by 2021. The first wave of North America ethane cracker projects is scheduled to begin in 2017. Dow’s Texas cracker project is one of several in the first wave. Other projects that are slated to launch in next the coming two years include Formosa, Indorama, ExxonMobil, CPChemand Mexichem/Occidental. The wave of ethane gas-fed cracker projects will help US ethylene derivative producers benefit from the cost-advantaged feedstock. Dow Chemical, which may soon become Dow-DuPont, expects to utilize the new ethylene output for its existing units at the same site and at others new associated downstream facilities in Texas and Louisiana.
ExxonMobil evaluating PE project in Beaumont, Texas
ExxonMobil is considering building a new polyethylene facility at its existing site in Beaumont, Texas. Per the application submitted to the city Beaumont, it does not yet specify design capacity or type of PE to produce at this proposed PE plant.
Comments: Like many other US PE producers, ExxonMobil is attempting to take advantage of cost-competitive shale gas through massive project expansions. ExxonMobil has 1,500KTA cracker and 1,300KTA HDPE/LLDPE facility in Baytown, Texas under construction and has been in talk with its long-time partner SABIC for potential ethylene project in USGC. With massive additional PE capacity coming on-stream in next five years, North America PE suppliers are expected to target foreign markets as important final product destinations, especially to China and Southeast Asian nations.
CB&I, Clariant startup a new PP catalyst facility in Kentucky, US
CB&I and Clariant have launched its JV Ziegler-Natta (ZN) polypropylene catalyst facility in Louisville, Kentucky, United States.
Comments: PP catalyst market is divided into two broad segments –catalysts supplied by the technology provider and catalysts supplied by third party producer. Clariant has been well-known as an independent catalyst producer, while CB&I with Novolen®technology is one of the largest global PP technology licensors. The cooperation between CB&I andClariantfor PP catalyst facility seeks synergies through the combination of CB&I’s expertise in PP catalyst and Clariant’s production experience, which would allow CB&I to position itself in a more competitive position in the technology licensing market. For the counterpart of the cooperation, the PP catalyst production unit is part of Clariant’s strategic plan in partnership with CB&I’s Novolen®technology business for growth opportunity.
EUROPE
SCOAR awards Technip for Azerikimya modernization project
State Oil Co. of the Azerbaijan Republic (SOCAR) has awarded a contract for Engineering Procurement and Construction (EPC) services for modernization of Azerikimya Production Union. The scope of work mainly focuses on renovation of its 300KTA cracker, installation a new refinery dry-gas treatment unit, new ethylene and propylene storage and related utilities and off-sites facilities. The modernization is scheduled to be completed in the first half of 2019. Along with the modernization work, SOCAR also awarded EPC contract for new HDPE plant at the same site to Maire Tecnimont.
Comments: To take advantage of its oil and natural gas resources along with geographic location in between Asia and Europe, Azerbaijan has a national initiative in place to pull more value out of natural resources as well as to play a more significant role in global petro chemical market. With upgraded its C2 value-chain at Azerikimya Production Union, SOCAR cannot only fulfill growing demand for petrochemicals in domestic market, but also put itself in a more competitive position in export markets, such as Eastern Europe and Western Asia. As a national executer for development of petrochemical industry, SOCAR currently has several petrochemical projects underway in various stages of completion, including renovating out-date oil refinery and build Oil and Gas Processing and Petrochemical Complex (OGPC) project (OGPC). The OGPC project was previously put on hold due to the combination of escalating total costs and low crude oil prices, and now more likely move forward after SOCAR cut the total cost by more than 50% to US$4B.
INEOS Styrolution acquires K-Resin SBC
Germany-based INEOS Styrolution has inked an agreement to take over K-Resin styrene-butadiene copolymer (SBC), a joint-venture between CPChem and Daelim. No financial details on this purchase are disclosed yet. The acquisition is still subject to customary closing conditions and governmental approvals.
Comments: INEOS Styrolution is a global Styrenics supplier with a focus on styrene monomer, polystyrene, ABS and Styrenic specialties. The company provides Styrenic applications for many everyday products across a broad range of industries, including automotive, electronics, household, construction, healthcare, toys/sports/leisure, and packaging. Chevron Phillips Chemical and Daelim Industrial Company founded KRCC as a joint-venture in February 2000. The K-Resin®SBC plant is located in Yeosu Petrochemical Complex, the largest petrochemical complex on the southern coast of South Korea. K-Resin®SBC and INEOS Styrolution’s existing SBC brands Styrolux®and Styroflex®complement each other well. The combined business will offer a broad selection of SBC products to customers across the globe and serve better to different applications.
MOL to invest into petrochemical sector toward 2021
MOL Group has laid out a US$1.9billionstrategic plan that aims to diversify its petrochemical business for the next five years. The efficiency improvement on propylene and investment into promising propylene derivatives will be main focuses by 2021.
Comments: MOL Group is a Hungarian Multinational Oil and Gas Company headquartered in Budapest, Hungary. The company is the second most valuable company in the Central & Eastern European region, which is vertically integrated in areas such as exploration and production, refining, distribution & marketing, oil &gas, petrochemicals, power generation and trading. US$2 billion dollars spent on different sectors of the company’s focus such as refining, petrochemicals, consumer services and exploration and production services. The plan is to cut the share of motor fuels and increase the share of other refinery products. In the petrochemicals sector the company plans to move towards semi commodity and specialty products. MOL’s reference to “fast-spreading alternative technologies and changing consumer behavior” as driving its new strategy. This is an indication that European refiners are mulling the eventual impact of alternative fuels on their business.
MIDDLE EAST & AFRICA
UAE’s ADNOC sets up petrochemical expansion plan
UAE’s Abu Dhabi National Oil (ADNOC) plans to increase its refining and petrochemical capacity by more than 150% to 11,400KTAfor over next nine years. This expansion plan is a part of government-approved development strategy toward 2030.
Comments: The latest petrochemical expansion in Abu Dhabi ramped up production in 2016, with a 450K bbl./day increase of refinery capacity at Ruwais matched with a 1.5 million MT per year new cracker and derivatives units. The new planned investments are meant to continue the strategy of increasing the margins on the country’s oil production through downstream diversification. Unlike the light-feed crackers currently operating in the country, the new expansions are expected to be supported by a world scale mixed feed cracker, allowing increased C4+ production in addition to polyolefin expansions.
Kenya begins commercial operation of polybutadiene rubber plant
Kenya, a 50/50 JV between SABIC and ExxonMobil, has announced the start-up of polybutadiene rubber facility in Al-Jubail. Meanwhile, the company also begins testing production of halo butyl rubbers and EPDM and expects to commercially operate in the first quarter of 2017.
Comments: Fast growth in the transportation sector in the Middle East and Asia has rapidly increased demand for synthetic rubber products. The addition represents a significant broadening of Kenya’s traditional product portfolio, adding production capacity for several kinds of synthetic rubber including halo butyl, styrene butadiene, polybutadiene, EPDM, thermoplastic specialty polymers and 50KTAof carbon black pigment. The plant has state-of-the-art technology licenses from three companies, with ExxonMobil providing its proprietary EPDM, thermoplastic elastomer and halo butyl rubber technology, Goodyear Tire & Rubber Company providing SBR and polybutadiene technology, and Continental Carbon Company providing the technology for carbon black. In addition to supplying a fast-growing market, the plant demonstrates Kenya’s (50/50 JV between ExxonMobil and SABIC) ability to bring together leading technology licenses and engineering construction companies under one roof.
ASIA PACIFIC
Sinopec, Taiwanese consortium form JV for Gulei petrochemical project
China giant Sinopec and Taiwanese petrochemical consortium have officially formed 50/50 joint venture for a vertically-integrated petrochemical complex to be built in Gulei, Fujian, China by 2020. The project with total estimated expenditure of US$4.09 billion will produce 1,000KTA ethylene, 600KTApropyleneand associated downstream products.
Comments: Gulei Peninsula has been selected as one of several national petrochemical hubs under 13th Five Year Plan. The Gulei petrochemical project initiated in 2013 and was proposed to build a highly vertically-integration complex from crude refining to downstream chemical production. However, with impacts resulted from low-priced crude oil, the project has been re-scoped into two phases. Phase I is to build petrochemical facilities using naphtha as feedstock with targeted start-up in early 2020, while originally-proposed refinery is subject to further determination based on market situation. The Gulei project posts growth opportunities for Chinese and Taiwanese petrochemical players. China currently has been in efforts to move its downstream petrochemical production toward high value-added markets that highly rely on imports. The outputs of this complex, including EVA, ethylene oxide (OX), propylene oxide (PO), styrene monomer (SM), butadiene (BD), solution-based SBS and polypropylene (PP), will make a contribution to China’s self-efficiency goal. On the flip side, Taiwan is China’s major import partner for petrochemicals. The investment on Gulei peninsula allows Taiwanese petrochemical producers to avoid custom tariff and stay competitive compared to other foreign rivals in Chinese market.
China’s CSPC to complete ethylene expansion project in 4Q 2017
China’s CNOOC and Shell Petrochemical Company (CSPC) has announced its movement to take over CNOOC’s ongoing expansion that build1,200KTAcracker and associated derivatives plants at CSPC’s existing site in Guangdong. The construction is currently 70% completed and is expected to become operational in the fourth quarter of 2017.
Comments: A combination of low crude oil prices and government tightening of environmental regulations has put a damper on olefins capacity additions in China as less attractive economics for coal to olefins, methanol to olefins, and propane dehydrogenation plants have forced producers to delay or cancel upcoming plants. CNOOC and Shell have planned the complex expansion for several years, and the relative project economics have recently gotten only more favorable. Two other world-scale crackers (Fujian Petrochemical and Taiwanese-owned complex in Zhangzhou and Sinochem’s Quanzhou project) are projected to start operation in China by 2020. Unlike the Shell/CNOOC project, both of those crackers are greenfield and will take longer to construct. Products from these projects will compete with increased imports from North America and Iran for domestic market share.
China’s Connell to license UOP MTO technology
China’s Connell Chemical Industry Ltd has selected UOP’s technology for its planned methanol-to-olefin facility in Jilin City, China. The MTO unit is scheduled for completion in 2017 with output supplied to ethylene oxide and propylene oxide producers in the same industrial park.
Comments: China’s Connell Chemical, located in Jilin province, is a major aniline supplier in China and provides nitrobenzene, ammonia, and nitric acid. The city of Jilin is the second largest fine chemical production hub in Northeastern China, which relies on ethylene and propylene as feedstock for production. Currently, the ethylene capacity in Jilin is 700KTA and still far from being sufficient, which present an opportunity to Connell Chemical. Connell’s methanol-to-olefins unit is aiming to supplement local olefin supply and complete the local chemical production chain. Meanwhile, Connell Chemical plans to build two 3,600KTA methanol facilities in Texas City, Texas that take advantage of cost-competitive NGL and then export back to China. Connell’s Texas methanol plants are scheduled to be completed by 2020.
Japan Polypropylene to build a new 150KTA PP facility by 2019
Japan Polypropylene has announced plan to set up a polypropylene (PP) facility in Ichihara, Chiba Prefecture, Japan with scheduled start-up in 2019. The PP unit is proposed to have production capacity of 150KTA and will replace two existing outdated plants.
Comments: Japanese polymer resin producers have been facing flat domestic demand due to high influx of imports from rest of Asia and Middle East. This led to the need for pricing Japanese products competitive enough with low cost import resins. JPP’s new plant will help achieve lower production costs and have will have about the same capacity of existing two plants. The company expects to compete with low cost producers in both domestic and export markets.
China’s Oriental Energy undergoes testing production at PDH/PP project
China’s Ningbo Fortune has completed the phase I of Ningbo PDH/PP project and is in preparation for upcoming commercial production. The phase I includes one 660KTA propane dehydrogenation (PDH) unit and one 400KTA polypropylene (PP) facility. Oriental Energy is currently fundraising for the phase II that is proposed to build another 660KTA PDH unit at the same site with expected start-up in 2018.
Comments: Oriental Energy, which parent company of Ningbo Fortune Petrochemical as well as Zhangjiagang YangzijangPetrochemical, is a major privately-run supplier of LPG in China. Currently, China relies on imports to meet domestic demand for propylene and polypropylene. With the leverage of being large scale LDPE importer, Oriental Energy has strategically expanded its business toward C3 value chain via cost-advantaged PDH process for the growth opportunity. Besides to the Ningbo C3 project, Oriental Energy has another C3 complex in Zhangjiagang that includes one 660KTA PDH unit and one 40KTAPP plant in operation and one 660KTA PDH unit currently under construction.
COAL-TO-CHEMICAL
Zhongtian He Chuang launches coal-based petrochemical complex
China’s Zhongtian He Chuang has started up its coal-derived petrochemical complex in Ordos, Inner Mongolia. The new coal-to-petrochemical complex includes a 120KTA LDPE plant, a 250KTA pipe grade LDPE plant, a 300KTALLDPE unit, and 350KTAPP facility.
Comments: Zhongtian Hechuang Energy (ZHE) is primarily owned by state-owned giants China Coal and Sinopec. ZHE was formed in 2007 in response to China’s development plan of coal-to-chemical industry. The coal-to-chemical complex is part of Coal Deep Processing Demonstrative Project supported by government and has two associated coal mines with total output of 25,000KTA. The project is by far the largest vertically integrated coal-to-olefins complex in China, which starts with coal and ends with polyolefin products. Currently, development of China’s coal-to-chemical has slowed due to a combination of environmental concerns and the lack of downstream product competitiveness due to low-priced crude. The start-up of the complex will not only increase China’s self-sufficiency on polyolefins but also encourage coal-to-chemical players to further integrate toward high value-added products, which is the key for China’s coal-to-chemical industry to succeed.