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The Propylene Value Chain
An examination of factors influencing the
propylene downstream chain
George Martin | Senior Consultant
2016 Annual APLA Reunion
19-22 November 2016 | Sheraton Hotel – Buenos Aires
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• US C3 and derivatives pricing
• Supply & demand of C3 and derivatives
• Summary and conclusions
Agenda
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Propylene and derivatives pricing
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Propylene’s main downstream chains
Propylene C3
Acrylonitrile
ACN
Polypropylene
PP
Acrylic Fibres PU*
Propylene Oxide
PO Alcohols
Isopropanol (IPA)
2-Ethyl Hexanol (2-EH)
Normal Butanol (NBA)
IsoButanol (IBA)
PG**
PU* - Polyurethane PG** - Propylene glycol
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C3 - PP spread narrows, margins fall
Propylene
Polypropylene
Spread
Cen
ts/l
b
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Acrylonitrile slowly coming back, but still down
USD
/MT
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Propylene Oxide – Prices down with crude oil
USD
/MT
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Solvents and plasticizers
USD
/MT
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Phenol and acetone pricing (Export spot, FOB US Gulf)
USD
/MT
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Supply & Demand
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How is propylene used?
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On purpose propylene (PDH) plants
Company Capacity
’000 tonnes/year Location Start-up Status
Dow Chemical 750 Freeport, Texas Dec 2015 Online
Enterprise Products 750 Mont Belvieu, Texas Q2 2017 Under construction
Formosa Plastics 658 Point Comfort, Texas 2017 Under construction
Inter Pipeline 500 Alberta End-2019 Evaluation
BASF (MTP) 475 Freeport, Texas 2019 Cancelled
Sunoco 650,000? Pennsylvania NA Evaluation
Dow Chemical New plant US NA Cancelled
Enterprise Products New plant Texas, US Shelved Cancelled
REXtac 300 Odessa, Texas Cancelled Cancelled
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US propylene exports expected to grow
Propylene exports will increase as new US supply comes online
Tho
usa
nd
To
nn
es
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New US polypropylene (PP) projects
Company Capacity Location Start-up Comments
Goradia 450,000 Edmonton, Canada late 2019 ?
Formosa Petrochemical NA St James parish, LA NA Aproved
Formosa Plastics NA Point Comfort, TX NA ?
Braskem NA NA NA Evaluation
At this rate of PP supply growth, markets in 2020 and beyond
could be even tighter than they are today.
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Global PP capacity (72m tonnes/year in 2015)
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PP production in Latin America (2.4m tonnes)
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PP demand growth in S. & C. America (2015-2020)
ARGENTINA 2.0%
BOLIVIA 7.7%
BRAZIL 2.4%
CHILE 4.7%
COLOMBIA 5.0%
COSTA RICA 9.0%
CUBA 29.2%
DOM. REP. 2.7%
ECUADOR 4.7%
EL SALVADOR 12.7%
OTHER LATIN
COUNTRIES13.2%
GUATEMALA 4.7%
HONDURAS 5.9%
JAMAICA 24.6%
NICARAGUA 5.9%
PANAMA 14.9%
PARAGUAY 8.4%
PERU 4.1%
TRINIDAD -
URUGUAY 7.6%
VENEZUELA -1.0%
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A mature outlook for acrylonitrile
• ABS has surpassed acrylic fibre as the largest end-use; acrylic fibre growth is limited by strong competition from polyester
• ABS to remain the key driver for acrylonitrile
• Brazil: Sole producer in S. & C. America with 90K tonnes going mostly to acrylic fibres and exports. Peru largest regional consumer
Source: ICIS supply and demand database
Capacity: 6.4m tonnes/year Consumption: 5.6m tonnes/year
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Propylene Oxide consumption (8.9m tonnes)
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Propylene oxide consumption in C. & S. America
Brazil = Only regional producer with 235,000 tonnes/year
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Summary and Conclusions
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What this could mean for the US
• Overseas markets will become less of a factor in the US as
domestic propylene and PP production ramps up
• US polymer exports will likely increase, but markets will
not be as long as polyethylene’s
• US will have to be more competitive in the global market,
even if this results in lower margins
• US feedstock advantage over other regions will remain
narrow for as long as crude oil prices are down
• US PP margins will remain under pressure, but feedstock
advantage will keep US producers in the black
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In Latin America…
• Low-cost raw materials in the US will remain the main
obstacle for propylene/polypropylene projects in the region
• A propylene plant and a 250K mt/yr PP plant are planned in
Tarija, Bolivia, with construction planned to start in 2017 and
production expected to start in late 2021
• Latin America is poised to benefit from increased competition
in global markets to place surplus PP production from the
US, the Middle East and Asia
• But the benefits may not materialize in countries where high
import tariffs exist
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But the most unpredictable factor for chemical trade will be…
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Thank you
George Martin 713.525.2612 george.martin@icis.com www.icis.com
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