Chemical Industry Summary
The deflation of global chemical prices continues following declining feedstock and oil/gas prices. Key olefins in the US are now hitting levels not seen since 2009 in some cases, not seen since 2003. Ethylene margins are starting to ease for US shale gas-based chemical producers as lower international prices have resulted from lower cost positions seen by marginal producers. For Europe, margins have temporarily expanded as the rate of olefin price decreases has lagged behind the collapse in feedstock prices.
Third-quarter financial results for chemical companies are due out soon, with the general expectation that year-on-year comps will be lower. As margins for the industry come in, many companies are reviewing cash deployment and capital expenditure strategies. The industry may need to consider dividend cuts to conserve cash as yields have increased as stock prices have eased.
Macroeconomics and Geopolitics
The IMF has released a semi-annual update of its view of the global economy. Global GDP growth is projected at 3.1%, down from last year’s result of 3.4% growth. On the positive side, Europe is now expected to grow 1.9% this year. However, growth in emerging economies is only expected to be 4% after averaging 5.7% in the last five years. China’s GDP growth is forecast at 6.8% in 2015 and is forecast lower in 2016/2017 at 6.3%/6.0%. Brazil is in a recession with GDP expected to shrink by 3% in 2015.
Following a strong Q2 growth of 3.9%, the US is expected to achieve 2.6% annual growth in 2015. US manufacturing PMIs are still in positive territory, but not robust. US housing starts in August of 1.126 million was close to the NAR’s projected annual rate of 1.13 million in 2015, a projected 13% improvement over 2014. For August, US auto sales were a record 17.72 million. Projected US auto sales of 16.4 million for 2015 represent a 5.5% improvement over a solid 2013.
Feedstock – Crude Oil
In the last week, global crude oil prices have improved slightly as production forecasts have been trimmed. Brent crude has recently traded slightly higher $50 per barrel and WTI in the range of$45-$50per barrel. In mid-October, NYMEX oil futures for December of 2016 traded at $ 52.05 per barrel, down from about $64 per barrel in February. This is well below the IHS forecast of $65 per barrel by the end of 2016. Crude inventories remain at very high levels globally and in the US.
Global crude oil demand growth in 2015 is expected to hit a record of 1.8 MM Bpd according to the IEA, up 2% from last year, but demand growth is expected to slow to 1.2 MM Bpd in 2016. The imbalance of global crude supply and demand is 1.5 to 2.0 MM barrels per day and has been hurt by the negative trend for China’s demand growth. China is currently the #2 oil consumer in the world, but a slowing economy has hurt consumption. In a recent report, the IEA has forecast that the imbalance in global oil demand will persist until late 2016. US crude inventories in late April peaked at 1.18 million barrels, approaching maximum storage capacity. Low prices have begun to impact production with the IEA now projecting that US shale oil demand will be down 0.093 MM Bpdin November. The lifting of sanctions for Iran is expected to provide an incremental 0.5 million barrels per day on the world market.
Feedstock – Natural Gas & NGLs
Now that the summer peak cooling season is over, US Henry Hub natural gas prices in October have eased down to below $2.50/MM BTU on weaker seasonal demand. US ethane prices are flat, continuing to trade in the range of $0.17 to $0.20 per gallon. Propane prices have strengthened and are in the mid-40s, a level achieved in early September. Margins for ethylene production from propane are about $0.15/lb., near ethane cracking Reat, about half of the level enjoyed this summer. In the US, over 300,000 barrels per day of ethane are being rejected into gas, mostly in remote areas including the Rocky Mountain States that are too far away to recover Y-grade transportation costs. A large portion of recovered ethane volumes come from the nearby Eagle Ford, Haynesville, and Barnett shale formations. The current oil-to-gas price ratio of 17:1 is supportive for North American producers, but down significantly from the peak of 52:1 seen in mid-2012.
US Olefins & Polyolefins
US contract ethylene prices in September settled down 1.0 cents/lb.to 28.5 cents/lb.on a net transaction price basis. This is the lowest price for contract ethylene seen since 2003. Ultimately, US ethylene prices are set by international polyethylene pricing at a level that makes US-produced PE competitive in global markets. The drop in global oil prices has reduced the US oil-to-gas arbitrage that has kept international PE prices high for the last several years. At the reduced ethylene prices, US crackers with ethane feeds had September margins in the $0.15-0.17/lb.area, a small drop from last month’s results.
September chemical grade propylene prices dropped 3.0 cents/lb., to a level of 0.285 per pound. This is the lowest contract price since mid-2009, a period that also saw depressed crude oil pricing. Contract propylene prices have fallen 10 of the last 11 months and have dropped a cumulative $0.465/lb. since November 2014. Ahead of the October contract settlement, spot prices for propylene have firmed suggesting either a rollover or a slight increase in October propylene.
For October, there was a split settlement for US butadiene contract prices, with most producers down$0.01per pound and one producer down $0.03 per pound. The market is currently balanced.
In September, US contract PE prices declined another $ 0.04 per pound, following a drop of $0.05/lb.in August. October prices appear to be leveling off as global supply and demand have come back into balance following unplanned outages over the summer. According to the ACC, PE operating rates in the second quarter were firm at an average of 93% of capacity, up 1.5% from the first quarter.
In September, US PP prices were down 1.0 cents/lb., but margins improved as propylene feedstock fell 3.5 cents/lb. This is similar to the August that saw polypropylene down 3.5 cents/lb., but polypropylene down only 1.0 cents/lb. Over the two months, polypropylene margins have improved by 4.5 cents/lb. as feedstock prices dropped faster than polymer prices.
European Olefins & Polyolefins
For October, contract ethylene prices in Europe softened € 40 per metric ton(MT), to a level of €905per MT. On top of an a€160per MT cumulative decrease seen in August/September, prices are now below the beginning of the year levels. Ethylene margins for European heavy feed crackers have recently expanded due in part to lower feedstock prices associated with crude oil softness. In September, HDPE prices began to stabilize after falling in the area of €100-150 per MT in August.
European contract polymer grade propylene settled at €710 per MT in October, down €110 per MT from August, identical to the September drop in price. Contract butadiene prices for October settled at€670 per MT, down €25/MT from September. Spot prices for butadiene in Europe peaked in July near €1,000 per MT, but are now a bit below contract prices.
Asian Olefins & Polyolefins
Spot ethylene prices in Asia are currently near US$ 800 per MT, falling from over $1,400 per MTseen in July. The naphtha/ethylene spread has eased from peak levels near $800/MT to $400-450/MT. Regional operating rates and spot prices had benefitted from numerous Q2 outages that have now been completed. Asian spot propylene prices have recently fallen to below US$800/MTfrom overUS$1,000 per MT in July. Film grade HDPE is currently US$1,310 on a spot basis, down $200 per MT from peak levels early this summer.
Global Chlor-alkali
The Chlorine Institute reported that effective operating rates for the US chlor-alkali industry were 86% in August, down from 90% recorded in July. The last three months’ operating rates have averaged 87% of the capacity operating rate is the highest level since May 2011 and reflects the impact of several planned outages scheduled for the fall.
Several US producers have announced price increases for caustic of $65 per short ton for the fourth quarter. One unconfirmed report has another producer announcing an $80 per MT increase. While an improving US economy has boosted caustic demand, weak international conditions and exports and the poor aluminum market may prove to be a significant headwind.
The second US chlorine price increase proposal this year, a US$35 per ton increase announced in May, continues to be implemented. The 2015 chlorine price increases are the first in several years. And follow substantial recent new plant expansions. ECU margins for the industry remain near trough levels at nearly US$150 per ton.
European chlor-alkali operating rates in July and August both exceeded 80% of capacity and production for these two months up 3.7% from last year.
On October 1, Olin Chemical completed the purchase of the Dow Chemical chlorine/epoxy assets making it the largest global producer of chlorine and caustic.
AMERICA
Sasol to complete the US ethane cracker project by 2018
Sasol plans to spend US$9.8 billion (US$5.1 bn in 2016, US$4.7 bn in 2017) for the next two years to expedite the construction of an ethane cracker in Charles Lake, Louisiana. The cracker is scheduled to come on stream in 2018 and will have a production capacity of 1,500 KTA.
Comments: The drop in crude oil prices has narrowed the advantage between cracking ethane and naphtha to produce ethylene which leads several companies planning to build crackers in North America to reconsider their investment. Sasol, however, had already made its FID in 2014 and broke ground on the US$8.1 billion project in March 2015 in Lake Charles, Louisiana. The complex is scheduled to be one of six grassroots ethylene crackers coming on-stream in 2017/2018 in the Gulf Coast region. Sasol is betting on the long-term availability of cheap ethane feedstock from U.S. shale gas to offset the negative effects of the oil price decline.
Bolivia revises budget for propylene and PP project
Bolivia’s state-run petrochemical producer YPFB has the approval of additional financing for the propylene/polypropylene complex in Tarija from Bolivia’s lower house. The budget has increased by US$230 million to US$2.03 billion since YPFB announced the plan in 2014. The new facility will produce 300 KTA of propylene and 350 KTA of polypropylene and is expected to be running by 2019.
Comments: Bolivia is a country rich in natural resources and a major natural gas exporter in Latin America, mainly to Argentina and Brazil. The propylene/polypropylene facility is part of Bolivia’s national strategy to modernize its oil and gas industry in response to Brazil and Argentina’s expectedly increasing self-sufficiency in natural gas in the long term. The national plan started with building a natural gas liquid separation unit at the Gran Chaco complex in the country’s most gas-rich area Tarija. Valuable components in gas, such as ethane and propane, will be extracted for selling and potential captive use. In addition to the propylene/polypropylene plant, YPFB also plans to build an ethylene/polyethylene complex adjacent to the Gran Chaco complex with a scheduled start-up in 2022. Once these downstream production units are running, produced polymers are expected to focus on export markets in other Latin American nations. The long-term investments would help Bolivia add value to its natural resources.
Badlands NGL to secure feedstock for PE project
Badlands NGL has entered an agreement with Bakken Shale producer Continental Resources for long-term ethane supply for a planned polyethylene facility with a capacity of 2,000 KTKTA in North Dakota. No details on licensing technology and expected start-up date has been announced.
Comments: Continental Resources is a petroleum liquids producer in the United States that has large holdings in the Bakken formation tight oil area of North Dakota and Montana. Based in Oklahoma City, the company also has a leading presence in the Anadarko Woodford Play of Oklahoma and the Red River Units Play of North Dakota, South Dakota, Montana, and WyomingFounded in 1967, Continental’s growth strategy has focused on crude oil since the 1980s. Badlands NGL, LLC, and its partners expect to invest $4 billion to build the polyethylene manufacturing facility in North Dakota. The project will be one of the largest private ininvestmentsThe value-added manufacturing plants will tap into North Dakota’s abundant supplies of liquid natural gas to source ethane. The facility will convert ethane gas to lolow-densitynd and high-density plastics which are used to make a wide range of end products for consumers and industry. The facility will be able to produce 1.5 million metric tons (3.3 billion pounds)of polyethyleneannuallyandwill employ highly trained people in manufacturing, marketing, administrative, safety, financial, and executive positions. The project will take at least three years for full development. Badlands intends to market the majority of the polyethylene products domestically, but the product will also find its way to markets in Asia, South America, and Europe. Project developers say that the plant’s location in North Dakota will enable them to efficiently ship to world markets from the Pacific Northwest and Atlantic ports.
Wellman Advanced Materials enters into automotive TPOs
Recently renamed Wellman Advanced Materials announced it will expand capacity, including TPOs, long fiber polypropylene (LFPP), and polypropylene compounding, at its existing facility in Johnsonville, South Carolina by 20 KTA for new capacity for the automotive market in North America
Comments: The company has appointed new management plans to expand its presence in the lucrative North American automotive market. The US automotive market is in a period of healthy growth with carales close to the levels that they were prior to the 202008 economic recession. As automotive production ramps up, suppliers are competing to offer newer, advanced materials that will aid in lilightweightnd provide better aesthetics
Synthos calls off Nd-polybutadiene project in Brazil
Poland-based Synthos has canceled its plan to build a neodymium polybutadiene rubber facility in Rio Grande do Sul, Brazil. The cancellation resulted in feedstock and capital expenditure issues that Synthos has encountered since the project was announced in April 2014.
Comments: Synthos’ decision not to proceed with the proposed Nd-PBR plant in Brazil is due to the overall tightness in the butadiene market. Butadiene has been tight globally for a couple of years now and the situation is expected to remain for the next 12 months. China is building a lot o of new butadiene capacity and some of these plants will be based on proprietary on-purpose butadiene technologies which will ease the supply situation to a certain extent Asia is the largest butadiene exporter currently and is expected to remain so in the near future. Considering these uncertainties in obtaining a regular supply of butadiene, Synthos has decided not to proceed.
EUROPE
Unipetrol awards Technip for HDPE project in Czech
Czech-based Unipetrol has signed a US$242 million deal with Technip for the engineering, procurement, and construction (EPC) of a new polyethylene plant at Unipetrol’s existing complex in Litvinov, Czech. The polyethylene will produce 270 KTA of hihigh-densityolyethylene (HDPE) using INEOS Inovene S technology and is expected to begin construction in Q2 of 2016 with a heduled start-up in mid-2018.
Comments: Unipetrol is a largely-owned subsidiary of Polish-based refiner PKN Orlen, the largest oil processor in Central Europe. The company currently has two HDPE production lines with a combined capacity of 320 KTA (120 KTA offorE1, 200 KTA for PE2). The set-up of PE3 is to replace its oldest HDPE line (PE1) to increase the production efficiency of using ethylene. The expansion will allow Unipetrol to expand total HDPE capacity by 150 KTA to 470 KTA in response to the owing demand for HDPE in Europe where PE supply is historically tight. Also, INEOS’ technology will give Unipetrol manufacturing capacity to target other product segments such as cosmetics packaging.
Lanxess allies with Saudi Aramco for synthetic rubber business
Lanxess has created a 50/50 joint venture with Saudi Aramco for synthetic rubber. Under the cooperation, Lanxess will contribute its synthetic rubber business, while Saudi Aramco will provide access to raw materials with competitive costs in the Middle East and pay US$3.1 billion in cash in exchange for 50stakeint the venture. ThThis transactions are expected to close in 2016 and are subject to final approval from regulatory authorities.
Comments: Lanxess has been restructuring the synthetic rubber business division by consolidating global production to align with market status since 2014. Early this year, Lanxess announced a series of plans to consolidate synthetic rubber production facilities in Europe and open new plants in Asia to cater to the owing demand for synthetic rubber driven mainly by China and Southeast Asian nations. In partnership with Saudi Aramco, Lanxess can secure cost-competitive raw materials from the Middle East for the production of synthetic rubber, thereby improving the business cost structure. On the other side of The Saudi Arabian counterpart, the cooperation with Lanxess will allow Saudi Aramco to move from exploration and refining toward downstream production that serves clients manufacturing automotive parts and tires.
MIDDLE EAST & AFRICA
Oman to award Liwa Plastics InIndustriesroject
State-ran Oman Oil Refineries and Petroleum Industries Company plans to award the Litwa Plastic Industries project with four engineering procurement and construction (EPC) packages in Q4 2015. The technical bidding worth US$5.2 billion is divided into four schemes –a liquid natural gas (LNG) plant inFahud, a 300 km-long gas pipeline from Fahud to Sohar, a800stream cracker and downstream facilities(an an38 KTAHDPE/LLDPEunitand a 215KTAPPunit)in Sohar. The complex is scheduled to start up in 2018.
Comments: LiwaPlastics Industries Complex (LPIC) is a transformational project that will improve Orpic’s product mix, and business model and support the development of a downstream plastics industry in Oman. Taking advantage of the growing global market for plastics, it’ll create new opportunities and putrpic as a significant player in the international petrochemicals marketplace. The project’s physical hub centers on the existing Orpic facility in the Sohar Industrial Port Area. LPIC is a steam cracker project which will process light ends produced in Orpic’s Sohar Refinery and its Aromatics plant as well as optimize Natural Gas Liquids (NGLs) extracted from currently available natural gas supplies. Its concept lies in rerouting elements of existing production in combination with adadditionallyurchased feedstocks to deliver high-value polymer products for domestic and international marketplaces. Its primary goal is to further increase the value-added products that can be derived from Oman’s crude oil and natural gas. It will enable Oman, for the first time, to produce polyethylene thus enabling Orpic to deepen access to its existing international markets as well as develop new ones.
ASIA PACIFIC
China’s Zhejiang Satellite Petro to build PP plant
According to a recent announcement, Chinese acrylic acid producer Zhejiang Satellite Petro Chem Co. plans to build a 450 KTA of the propylene production unit and a 300 KTA of polypropylene facility with a total expenditure estimated at US$472 million (RMB 3 billion) at its Jiaxing site. The project is expected to begin construction within 6 months and come online within 30 months.
Comments: Zhejiang Satellite Petro Chem Co. is a major producer of acrylic acid in China. They are vertically integrated toward both upstream and downstream production which includes a propylene facility, acrylic ester facility, and plans to expand acrylic acid capacity. Horizontal integration toward other C3downstream businesses is also part of corporate strategies. Despite a significant increase in the domestic capacity of polypropylene in the past few years, imported polypropylene still accounts for around 40% of overall consumption in China. The gap between total demand and domestic supply is expected to continue for the short term and will give Zhejiang Satellite Petro space to play.
China’s Sanjin Petrochemical starts up an on-purpose propylene production facility
Sanjin Petrochemicallocated in Shaoxin city, Zhejing, China has begun operation of an on-purpose propylene production plant with a capacity of 450 KTA. The facility is the second dehydrogenation of propane(DHP)unit in China using UOP’s C3 Oleflex™ process technology.
Comments: It is estimated that more dozen of dehydrogenation of propane (DHP) units in China are currently under various stages of construction. Zhejiang province is a major petrochemical cluster in China with a historic focus on upstream refining and downstream production. Many petrochemical producers here are putting efforts into vertically integrating feedstock that will improve the cost structure of production. Sanjin Petrochemical’s DHP unit is mainly for captive consumption for polypropylene production, while Satellite Petrochemical has one DHP unit serving the production of acrylic acid with yet one more to be built in the short-term for polypropylene. However, due to all the DHP units coming online in near future, propane resources in China are expected to be far from self-sufficiency. Consequently leading to increased import of methanol (for methanol-to-olefin) and LNG from overseas. This trend has opened up opportunities for regions where natural gas is cheap and abundant to meet the growing demand for propane. For example, Chinese-back Northwest Innovation Works is planning to build a production facility in the US that can convert natural gas to methanol which will be sold to China as feedstock for methanol-to-olefin production. China has recently strategically partnered with Turkmenistan for building a gas pipeline via Pakistan to China.
Jiangsu Sailboat Petrochemical delays the start-up of the methanol-to-olefins facility
China’s Jiangsu Sailboat Petrochemical has postponed the start-up of its methanol-to-olefins (MTO) facility in Liangyungang, China to mid-2016. The MTO plant will produce 833 KTA of ethylene and propylene using UOP’s technology. The C2/C3 production unit is mainly to supply captive consumption of its upcoming downstream facilities, including one EVA/LDPE unit, one super absorbent polymer unit, one acrylonitrile unit, and one methacrylate unit.
Comments: Jiangsu Sailboat Petrochemical postpone the start-up of the methanol-to-olefin facility due to the late arrival of some key facility components. Once on stream, this methanol-to-olefins (MTO) plant will be the largest MTO unit by capacity in the world. The company also plans to launch C3 derivatives production facilities using purchased propylene as scheduled in October 2015. These production units include super absorbent polymer, methacrylate, and acrylonitrile. Jiangsu Sailboat’s new EVA/LDPE plants (one for the tubular process and another for the autoclave process) with a combined capacity of 350 KTA will be affected by the delay. The company plans to produce EVA copolymers with high VA (vinyl acetate) content of up to 40% in response to growing demand. EVA copolymers (VA content > 17%) demand is driven by solar encapsulation film and hot melt adhesive. However, there are currently only four domestic producers of high EVA, including Beijing Organic, Beijing Huamei, Beijing Yanshan, and BASF-YPC. Besides Sailboat’s EVA/LDPE start-up, there are new EVA facilities scheduled for operation by 2017 from Formosa Plastic (Ningbo), Shandong Haoda (Shandong), and USI (Taiwan). All targeting to fill the EVA domestic supply gap for the solar film and hot melt adhesive industries.
South Korea’s S-Oil to expand toward petrochemical downstream business
South Korea-based refiner S-Oil Corp to invest US$4.1 billion in expanding petrochemical business. The expansion will include a 21,000 bbl/day residual fluid catalytic cracker (RFCC) and two downstream units. A405KTA polypropylene facility and a 300KTA of propylene oxide plant, which is expected to come on stream by Q2 2018.
Comments: S-Oil, a Saudi Aramco affiliate in South Korea, is a major oil refiner in this country. The company’s current petrochemical portfolio includes propylene and BTX. S-Oil plans to invest approximately US$4.1 billion to expand its refining and petrochemical businesses. The petrochemical products under investigation include PP and Propylene Oxide (PO). Upon completion of the expansion, S-Oil is poised to become a stronger competitor to its nearest competitors, like SK Group and GS Caltex. The SK Group produces PP and PO through SK Chemical, while GS Caltex produces PP. Currently, SK Chemical is the only producer of PO in South Korea and the company is planning to build another 400 KTA PO plant using BASF’s technology by 2018.
SABIC and SK launch metallocene PE facility
SABIC SK Nexlene Co. has begun commercial operation of its new polyethylene (PE) plant in Ulsan, South Korea with a capacity of 230 KTAusingexclusivelytheNexlene Solution Technology. Nexlene Solution is a metallocene technology developed by SK Chemical and will allow the plant to produce metallocene LLDPE, polyolefin plastomers (POP), and polyolefin elastomers (POE).
Comments: SABIC SK Nexlene Co.isa 50/50 JV between SABIC and SK Global Chemical. It was formed in July of this year for synergy in getting into the metallocene polyethylene market. The metallocene polyethylene market is currently led by Dow Chemical, ExxonMobil, and Mitsui Chemical. According to a statement from SK Chemical, polyethylene material made by Nexlene technology has better shock resistance, transparency, and processability over existing polyethylene products in the market. With the opening of the Ulsan facility as the first step into the premium PE market, SABIC and SK plan to build another facility in Saudi Arabia and then further expand production sites worldwide for the long term. In past years, SK has strategically formed joint ventures with major players in foreign nations to increase its global presence and serve the premium petrochemical market. SK formed a joint venture with Repsol for lubricants in Spain, with Sinopec for ethylene and ethylene derivatives production in Chinaandwith JX Nippon oil&gas for lubricants and paraxylene in South Korea.
SHALE GAS DEVELOPMENT
Argentina targets shale gas for economic growth
Argentina’s state-operated energy firm YPF plans to ramp up shale gas exploration and production through partnerships with foreign producers, such as Chevron and ExxonMobil, in the hope to reduce the nation’s supply deficit of natural gas.
Comments: According to US EIA, Argentina holds 802 trillion cubic feet of recoverable shale gas, which is far more than its 12 trillion cubic feet of proven conventional natural gas resources. For the past decade, Argentina’s natural gas production has been gradually decreasing, leading to increased reliance on imports, mainly from Bolivia. Vaca Muerta formation located in Neuquén province is one of the most promising shale basins outside of North America. Has drawn significant interest from international oil& gas players including ExxonMobil, Shell, Chevron, Total, and Gazprom, all of which have production agreements with YPF. Currently, 15% of natural gas produced in Argentina comes from shale gas resources. YPF targets getting 50% of domestic natural gas from shale gas resources by 2020viathese partnerships, thereby decreasing reliance on imports. In the meantime, Argentina plans to expand petrochemical output to align with expected increases in natural gas production. Similar to natural gas, the country is a net importer of polymers. This circumstance gives room for YPF to boost production and add more value to natural gas. Recently, YPF has acquired stakes in two major polypropylene producers in Argentina as the first step for capacity expansion.
BIOBASED
Zeon develops new technology for bio-based isoprene
Japan-based synthetic rubber producer Zeonhas have been jointly developed biobased isoprene from biomass for synthetic rubber with Yokohama and the National Research &Development Agency RIKEN. The cooperation among these three parties began in 2013, using the cell design and plant science technologies initially developed by RIKEN Centre for Sustainable Resource Science (CSRS). Zeon along with its partners targets 2020 to commercialize the technology.
Comments: Isoprene is an important raw material for synthetic rubber (polyisoprene) that is widely used in tires, medical equipment, toys, shoes, and as adhesives in paints & coatings. Approximately 70% of the isoprene produced globally goes into the production of polyisoprene. Isoprene is produced via different methods including separation of the C5 stream, dehydrogenation of isopentane, isobutane dehydrogenation, methanol to formaldehyde production, etc. All the production methods involve several extraction steps and are capital-intensive. Producers have developed economic methods of isoprene production from renewable feedstocks to contain production costs and remain competitive. Asia is currently a net exporter of isoprene and Zeon’s commercialization of the technology will add to this supply.
COAL-TO-CHEMICAL
China drafts development plan for Coal-to-chemical industry
China has finished the initial draft of the 13th Five Year Plan, China’s national plan for the term from 2016 to 2020, for the coal-to-chemical industry. According to the initial draft, China plans to develop six focused development bases in Mongolia, Shanxi, Ninxia, and Xinjian with corresponding measurements in place to address environmental concerns, improve production efficiency, and prompt value-added-orientated development.
Comments: China has been strategically developing the coal-to-chemical industry since 2005 when the 11th Five Plan took effect. The development is to leverage its abundant coal resource to overcome the national disadvantage of lacking crude oil and natural gas. Coal-to-chemical production in China mainly focuses on fuels and commodity chemicals. Many coal-to-chemical players in China are originally coal producers in a bid to ride the national development trend. As crude oil prices stayed high, these players can easily enjoy profitability by simply selling commodities, such as methanol and ethylene. However, profitability has been erased by a huge dip in crude price over the last 6-8 months. With rising environmental concerns on wastewater and pollution caused by coal-to-chemical production, the Chinese government has to readjust its development strategies to address these public concerns, while helping coal-to-chemical producers integrate into downstream products business with high-value addition. The Chinese government has tried to enact possible Tax Preferences that will aspire coal-to-chemical producers for further vertical integration.