Business

Overcapacity still hurting petrochemicals Demand for basic olefins and

aromatics is turning out

higher than expected, but

new capacity is being added

at an even higher rate

Basic U.S. petrochemicals have showed stronger demand in 1978 than most in­dustry officials expected as the year began. By summer, petrochemical profits, too, had begun to show a little life (C&EN, Nov. 13, page 16).

But from producers' point of view, the year has proved unsatisfactory, and prospects for 1979 look no better. Petro­chemicals still trail the rest of the chemi­cal business cycle.

Why the unexpected surge throughout the U.S. economy this year could not do more for petrochemicals is explained in a single statistic—the declining ratio of petrochemical production to nameplate production capacity at producers' plants. Expressed as a percentage, this ratio edged downward in 1978 to a combined 79% from 80% in 1977 for five key petro­chemicals—ethylene, propylene, buta­diene, benzene, and p-xylene—outlooks for which are detailed on the following pages. This percentage could drop again in 1979 to as low as 75%, as extensive new capacity comes on stream.

These low rates of capacity use, and the

excess supply they afford, prevent pro­ducers from increasing prices even though demand and production costs may rise. In some cases, prices have fallen under the pressure of production from new plants looking for a place to fit into an oversub­scribed market.

The one exception to this situation in 1978 was a price rescue for some aromatics from extremely low prices to current moderate prices with the help of strong competing demand from gasoline. But industry sources caution that this price pickup will last only as long as gasoline keeps up its market stimulation. Gaso­line's increased appetite for benzene and toluene especially, used to raise the octane level, is no surprise. But the extent of gasoline's incursions on aromatics this summer was unexpected. A dropoff could be just as sudden, especially if the U.S. economy is about to enter a slowdown for a few quarters.

Such a slowdown figures in producers' estimates for demand growth in petro­chemicals in 1979. For the five key pet­rochemicals, the overall demand is ex­pected to increase 5% next year. This is down from a 7 to 8% increase in 1978. The 1978 growth is a notch above the com­bined 6% growth expected a year ago.

Unfortunately for producers, these demand figures don't match growth in capacity. Combined nameplate capacity for the five petrochemicals grew 8% in 1978, and it will gain another 10% in 1979. This capacity counts only plants actually on stream in the first quarter of the year

and hence may lead to overstatement on capacity use.

There is some confusion on actual levels of capacity use because of apparent un­derstatement of production in initial fig­ures from the International Trade Com­mission. For example, ITC's final ethyl­ene production figure for 1977 is now almost a billion pounds higher than the initial figure given earlier in 1978. If the newer figure is accurate, it could help ex­plain ethylene's price stability in the face of rapidly increasing capacity.

However, industry market experts are a bit doubtful of ITC's ethylene figures and of others as well, notably propylene, now listed by ITC with a 33% production gain from 1976 to 1977, which, again, in­dustry people find hard to believe.

Industry's own estimates show a more moderate production gain for the five leading petrochemicals—to a total of 59.2 billion lb in 1978, worth about $7 billion. Of this, about 40%—worth about $2.8 billion—is sold on the open market, whereas the rest is converted by producers into derivatives.

The 1979 sales value for petrochemi­cals, like everything else for these prod­ucts, is difficult to project at this time. A general business slowdown in the U.S. could really hurt. After any such pause in growth, it would take at least another year for petrochemicals to match the renewed profit promise showing up in many other chemical businesses.

Bruce F. Greek, C&EN Houston, and William F. Fallwell, C&EN New York

Unused capacity is still growing for some of the most important petrochemicals % of nameplate capacity unused

35 I

30

25

20

15

10

5

0 1977 78 79

Ethylene Sources: Industry, C&EN estimates

1977 78 79 Propylene

1977 78 79 Butadiene

1977 78 79 Benzene

1977 78 79 p-Xylene

12 C&EN Nov. 20, 1978

Key Chemicals

Ethylene CHo=CrU

• Capacity expanding

• Demand gains slowing

• Prices holding

PRODUCTION/CAPACITY

Billions of lb

40 Production

Capacity3

1977 1978 1979 i Nameplate capacity as of first quarter.

HOW MADE

Cracking various hydrocarbons from ethane to gas oil by catalytic processes or in the presence of steam

MAJOR DERIVATIVES

Polyethylene 45 %; ethylene oxide/ glycol 20 %; vinyl chloride 15 %; styrene 10%

MAJOR END USES

Fabricated plastics 65%; antifreeze 10%; fibers 5 %; solvents 5 %

FOREIGN TRADE

Exports and imports negligible

PRICES

Contract—13 cents per lb with slight shading; spot market small

COMMERCIAL VALUE

$3.5 billion for total production, 1978

Success is quite relative these days for basic olefins. For example, insiders say that the kingpin of this group, eth­ylene, will have an outstanding year in 1979 if the price merely holds, even in the face of a huge wave of new U.S. production capacity.

In other words, ethylene producers are really in trouble. A quick look at capacity and demand forecasts leads to no other conclusion.

In 1978, nameplate ethylene capacity increased at a rate one and two thirds times the forecast demand increase of a billion pounds or so in 1979, when this capacity will first be available for full-scale use. For next year, capacity ad­ditions amounting to almost four times this demand increase will be coming on stream.

Operating rates will fall during 1979 as they did in 1978. Pessimistic fore­casts for the U.S. economy in 1979, if accurate, could mean even lower growth in ethylene demand and yet lower operating rates.

Some faint hope for ethylene pro­ducers is that recent official production estimates have proved to be too low. For example, the 1977 final production fig­ure for ethylene from the International Trade Commission is 25.4 billion lb. This is up nearly 1 billion lb from preliminary estimates of just a few months ago. Annual production for 1978, based on the first eight months of preliminary ITC estimates, runs well over 27 billion lb. This is again some 12% over similar estimates at this time in 1977.

Company officials forecast that pro­duction during the fourth quarter of 1978 will slow for several reasons. As a re­sult, 1978 production would be about 26.5 billion lb. Such production would give a reasonably good gain over pre­liminary estimates for 1977 production. In fact, this increase could exceed ca­pacity additions that went fully on stream during the year.

However, the higher final production total for 1977 suggests that a higher than expected total also will result in 1978. Ethylene production probably has been running along well enough to reach a 1.5 billion lb gain this year.

Some of this added production has gone into inventories, which may be nearing 2.5 billion lb. Although large, this volume is not considered excessive. The reason is that considerable product is needed just to fill pipelines and to meet contract needs during times of plant

operating problems or maintenance shutdowns.

Next year, some additions to inven­tories also will be necessary. However, these probably will not be large. Com­panies adding major capacity next year—Exxon Chemical, Shell Chemical, and Texaco—are all current producers of ethylene and hence have storage and pipeline systems already in operation. As a result, inventory additions will be about 200 million lb.

The forecast growth in consumption of ethylene in 1979 at a billion pounds or slightly more assumes slower growth in the U.S. economy, but not an outright decline. This ethylene growth, called "conservatively optimistic" by one in­dustry source, will lead to a 1979 pro­duction of 28 billion lb, up about 5%.

This consumption will come mostly from ethylene's most important uses—polyethylene and vinyl chloride for polyvinyl chloride. High- and low-density polyethylene and ethylene di-chloride, precursor to vinyl chloride, account for 60% of ethylene demand. In spite of their size and maturity, these uses are forecast to grow at a rate above ethylene's 5 %.

Offsetting good growth in ethylene demand for polymer products, including styrene, are slower rates for use in ethylene oxide and its derivatives, especially ethylene glycol. (Direct pro­duction of ethylene glycol from ethylene is just getting under way with apparent difficulties, so its growth rate is not meaningful.)

The other large-size use of ethylene, conversion to ethylbenzene for styrene, has declined in growth for some time. Growth in 1979 probably will be half the average rate for all uses of ethylene. Use of styrene in polymers and in sty-rene-butadiene rubber (SBR) has rela­tively low growth. Use in acrylonitrile-butadiene-styrene resins and other resins is growing at rates of more than 5%. However, their base is small and total consumption small compared to that of polystyrene and SBR.

With only modest hopes for increas­ing demand in 1979, it may be a year of strategic planning adjustments in eth­ylene. Since feedstock and other costs continue to increase, price cutting seems unacceptable. However, much new efficient capacity will be in opera­tion. The obvious solution is for planners in 1979 to shut down old capacity in 1980.

Nov. ^0, 1978 C&EN 13

Key Chemicals

Propylene CH2—CH—CH3

• Capacity expanding

• Demand disappointing

• Prices weakening

PRODUCTION/CAPACITY

1977 1978 1979

a Nameplate capacity as of first quarter.

HOW MADE

Recovered from cracked gas streams of refineries and coproduct streams of steam-cracking ethylene plants

MAJOR DERIVATIVES

Polymers 25 %; acrylonitrile 15 %; isopropyl alcohol 10 %; propylene oxide 10%; oligomers 10%

MAJOR END USES

Fabricated plastics 50%; fibers 15%; solvents 10%

FOREIGN TRADE

Exports—negligible; imports—small

PRICES

Contract—polymer grade 9 to 10 cents per lb; chemical grade—8 to 9.5 cents per lb; spot—lower in each

COMMERCIAL VALUE

$1.3 billion for total production, 1978

Propylene in 1978 is best characterized as a disappointment. Its performance is likely to be worse in 1979.

Propylene's situation is in many ways a rerun of ethylene's but with worse consequences. Capacity continues to expand faster than demand. This has led to softening of selling prices, something ethylene has so far largely avoided.

Propylene's troubles could be even worse if steam-cracking olefin plant operations were proceeding as plant designers had planned. However, be­cause of feedstock economics and op­erating problems, actual production and potential production of propylene are falling below expectations.

Generally, but not always, steam crackers are operated primarily to pro­duce ethylene in whatever volume is needed to meet demand. Propylene, a coproduct with ethylene, is produced at whatever volume results from current ethylene production. Propylene volume also is strongly affected by the various feedstocks used and by the severity (temperature) of operating conditions.

Currently, and for the near term, steam-cracker feedstocks are being shifted toward ethane and propane on the light end of the scale. This shift is an effort to use the maximum practicable quantities of these hydrocarbons be­cause they are selling at distressed prices. The result is that units designed to use ethane and propane are being pushed to higher operating rates.

Both of these actions tend to reduce production of propylene, butadiene, and other coproducts of steam cracking. Even so, the impact of this shift in feedstock on product mix is small compared to new capacity coming on stream. New U.S. propylene capacity will be 1 billion lb in 1978 and at least 2.5 billion lb in 1979.

A further unknown in future propylene capacity comes from refinery opera­tions. Refineries produce at least three times as much propylene, mostly from catalytic cracking operations, as do steam crackers. Consequently, the estimated new propylene capacity of 3.5 billion lb of chemical and polymer grades for 1978 and 1979 may be con­servative.

Most refinery propylene—about three quarters—goes to production of gaso­line or other fuels, often blended in small quantities with propane. Gasoline con­sumption of propylene is largely as an alkylate with C4 hydrocarbons. Because

the antiknock qualities of alkylate can be improved by addition of lead alkyls, it has been an acceptable gasoline compo­nent. But phasedown requirements for lead additives and growing demand for unleaded gasoline tend to make pro­pylene alkylate less valuable. The result is that potentially, more refinery pro­pylene is looking for a use outside gas­oline.

This trend could result in even more propylene aimed at chemical and poly­mer uses. Refiners have in place now, and can expand at moderate costs, distillation facilities to make chemical (92 to 94 % purity) or polymer (99+ %) grades.

This large potential excess of new propylene supply on chemical and polymer markets, as well as capacity expansions of steam crackers, is putting pressure on propylene prices. Price action is being finely tuned as both chemical plant operators and refiners run their computer programs to increase profit and minimize costs.

Because chemical grade is so much easier to make than polymer grade propylene (polymer specifications have risen), refiners would prefer to sell chemical grade material where possible. Some industry sources cite this prefer­ence as a reason for the current un­usually wide gap in prices between chemical and polymer grades. The spread now is as much as 2 cents per lb, double the 1-cent difference considered standard, and well above the 3/4-cent spread that occurs when propylene is in tight supply.

Unfortunately, lower prices and greater supply won't increase propylene demand enough to increase profits. Even if derivatives' prices also drop, consumption of derivatives isn't likely to rise.

Growth in chemical and polymer uses of propylene may average about the same as growth in uses of ethylene over the next year. The biggest use, poly­propylene, will exceed the average growth of 5 % per year throughout pro­pylene markets. But other important uses such as acrylonitrile will be well below the average.

The near-term goal for propylene, then, is to do as well as possible in the face of unfavorable market conditions. Demand will grow more slowly than the historical average, and capacity will not really be controllable. Downward pres­sure on prices will continue.

14 C&EN Nov. 20, 1978

Production

Capacity3

Key Chemicals

Butadiene • Output gains tiny

• Demand up moderately

• Prices holding

PRODUCTION/CAPACITY

Billions of lb

^ I Production • Capacity3

Jllll nun 1977 1978 1979

a Nameplate capacity for extraction and dehydrogenation as of first quarter.

HOW MADE

Recovered from coproduct streams of steam-cracking ethylene plants; dehydrogenation of butylenes from refineries, butanes from natural gas

MAJOR DERIVATIVES

Styrene-butadiene rubber 50 %; polymers 20 %; hexamethylene diamine 10%; other rubbers 10%

MAJOR END USES

Tires and other rubber products 80 %; nylon fibers, molded items 10 %

FOREIGN TRADE

Net of imports over small exports, about 400 million lb

PRICES

Contract—20.5 cents per lb

COMMERCIAL VALUE

$700 million for total production, 1978

Butadiene production in the U.S. this year and next likely will hold at about present levels. Demand growth will av­erage about 3% a year. However, market conditions could change sud­denly in the event of a U.S. rubber strike in 1979.

Undoubtedly, there will be short-term ripples in production and consumption of a few weeks to a quarter. Some of these ripples could be large, especially if a rubber strike occurs. The obvious result could be selling price fluctuations during 1979.

Production of butadiene in 1979 will grow very little overall from the esti­mated 3.5 billion lb of 1978. Growth will depend largely on operating conditions at steam-cracking olefins plants, espe­cially on the type of feedstocks being used. Economics of alternative butadi­ene production at other plants from n-butane continue to grow less favorable in comparison to economics of co-product butadiene from steam cracking. However, some shift to on-purpose (primary product) butadiene production can come if prices for raw material n-butane show any weakness. This weakness also could influence prices a producer will pay for alternative raw material butylenes.

This reprieve is just what it implies, a delay in eventual shutdown of these units. It does not mean that units now shut down are likely to be restarted any time soon. Further, if butylene supplies become scarce, at prices low enough to make butadiene competitively, less butadiene from these feedstocks will be available, and considerations will grow to shut down these units.

Additional butadiene output in 1979 will vary with feedstock costs but will not likely be limited by capacity. Extraction and purification units exist to handle all butadiene expected to be produced in steam crackers during 1979. In fact, excess capacity to handle coproduct butadiene will continue to be available for some time to come. This excess might actually grow at the same time that on-purpose capacity to dehydro-genate n-butane and butylenes is shut down. The problem then becomes transportation, since some extraction facilities will require C4 streams to be shipped to them for separation of buta­diene.

Even with plenty of capacity for bu­tadiene, domestic demand will continue to exceed domestic supply as it has

A CH2—CH—CH—CH2

through the years. Imports, particularly from Europe, will continue to make up the deficit. On balance, net butadiene imports over exports during 1978 will be down from 1977. Imports probably will increase during 1979, but this develop­ment hinges on world economics as they affect demand for hydrocarbon fuels, rubber, and plastics monomers, among other products.

U.S. demand in 1979 for butadiene probably will be up 3% over 1978 to about 4 billion lb. Imports will again supply one eighth—one of the highest for any large-volume U.S. petrochemi­cal—of this demand.

Changes in butadiene's consumption pattern occur so slowly that they are difficult to discern. For practical pur­poses, styrene-butadiene rubber will take half of domestic use of butadiene. SBR growth remains slow because of adjustments in tire composition and lower tire sales due to less annual mileage per car and longer life from radial tires. In 1979, consumption of butadiene in all applications of SBR will grow less than 2 % to about 1.75 billion lb.

Major ripples in butadiene consump­tion for SBR (and for other tire elasto­mers such as polybutadiene) will occur in 1979 if a long strike occurs in the tire industry. Tire companies obviously will build inventories in anticipation of a possible strike. Such inventory building probably has already begun, although tire makers are meeting a boomlet in demand to supply new-model auto pro­duction.

If a strike hits all large tire producers, rubber production still will continue for some time to permit producers to build inventories of rubber for expected heavy use after a strike is settled. Butadiene demand would follow this rubber pro­duction pattern closely. When rubber production filled warehouse space, bu­tadiene production would be reduced somewhat. Unfortunately, coproduct butadiene production can't be adjusted as easily as on-purpose production. A down-and-up sequence in pricing then might occur as efforts are made first to move excess supplies and later to meet sudden demand.

However, these ripples probably will average out over 1979 to make up a routine demand-supply year for butadi­ene. The gradual shift to increased co-product butadiene likely will continue without much disturbance.

Nov. 20, 1978 C&EN 15

Key Chemicals

Benzene • Demand growth slow

• Supply handicapped

• Prices rising

PRODUCTION/CAPACITY

Billions of gal

1977 1978 1979 a Nameplate capacity as of first quarter.

HOW MADE

Separated from re for mate produced at oil refineries; from pyrolysis gasoline produced at steam-cracking ethylene plants, and from coal tar

MAJOR DERIVATIVES

Ethylbenzene 50 %; cumene 15%; cyclohexane 15 %; aniline 5 %

MAJOR END USES

Polystyrene 25 %; other styrenic resins 10%; nylons 20 %; styrene-butadiene rubber 5 %

FOREIGN TRADE

Small, nearly in balance

PRICES

Contract—85 cents per gal; spot— about 5 cents higher

COMMERCIAL VALUE

$ 1.2 billion for total production, 1978

The good news for producers is that benzene's price is rising. The bad news for customers is that benzene is begin­ning to be in tight supply. But, as yet, benzene is not scarce enough to lift prices to a really profitable point.

As of mid-November, some contract prices for benzene have risen to 85 cents a gal, up from lows of under 70 cents a gal late last winter. Spot prices are even higher than 85 cents a gal, re­flecting the supply situation. Even higher prices appear to be in store after Jan. 1, 1979.

Production of benzene may top 1.5 billion gal in 1978. This volume is hardly a spectacular increase over 1977 pro­duction of slightly over 1.4 billion gal.

The current spot-market price in­crease of more than 20 cents a gal probably won't influence production for some time. Factors other than supply and demand for benzene for chemical uses are more important.

Plant operating problems top the list. During recent months, there have been a number of technical problems and accidents, which have reduced supply temporarily. And during the summer, producers made less than the usual ef­fort to correct operating problems be­cause profit from selling benzene was low.

Profitability—in effect, price—points up another important factor in benzene production: the availability of raw ma­terial. As always, chemical uses of benzene eventually must pay enough to attract benzene or its precursors away from competitive fuel use. Specifically, benzene-containing catalytic reformate at oil refineries is now used as the major source of high-octane material for gas­oline. Hence, gasoline competes form­idably with chemicals for benzene sup­ply.

Benzene first must sell for a high enough price to justify extracting it from reformate at refineries or from pyrolysis gasoline, a coproduct at steam-cracking plants making ethylene and other ole­fins. It also must sell for a high enough price to justify operation of alternative toluene dealkylation units making ben­zene. The main factors involved are the value of benzene in the reformate or pyrolysis gasoline, the value of toluene, and processing costs. Capital costs, overhead, and profits are next.

Producers first have to decide whether they should go to the trouble of operating their facilities if profits are

meager. Some might accept little or no profit for a time, but if capital costs are not covered, less justification exists to operate. Then the other cost factors are considered, back to benzene's raw materials cost.

These raw materials are always val­ued against gasoline. Demand for gas­oline proved unexpectedly strong this past summer. Gasoline inventories have been drawn down and have remained relatively low so far this fall, although they are recovering.

The shift to unleaded gasoline con­tinues unabated, putting pressure on supplies of hydrocarbons with high oc­tane values. The phasedown of lead al-kyls as an octane improver and the government's ban on use of methylcy-clopentadienyl manganese tricarbonyl (MMT) as an additive have put pressure on refiners to increase the use of aro-matics in gasoline. These supply pres­sures will continue unless the U.S. economy slows so much that sales of gasoline are affected.

Toluene, the second largest source of benzene, also has been rising in price because of its own value in the gasoline pool as an octane booster. Currently, toluene, when available on the spot market, costs about 70 cents a gal. Taking into account the loss of the methyl group in conversion to benzene and processing costs, a spread of 15 cents a gal between toluene and ben­zene (if benzene is sold for 85 cents a gal) makes operation of toluene hydro-dealkylation units difficult to justify.

A small expansion of benzene ca­pacity is occurring, however. Some of this added capacity comes from new steam crackers, and limited amounts come from debottlenecking of refinery operations. The actual amount of this added capacity is difficult to pin down because the net yield of benzene de­pends heavily on feedstock composition and on severity of operation at olefins plants.

So far, the tightening benzene supply has had little impact on manufacture of its derivatives or their sale. Plenty of capacity exists to make derivatives, thus, changes in their price depend on the manufacturers' ability to pass on price increases in benzene.

The outlook for benzene is for another year of slow growth in demand and ca­pacity. Prices for benzene, propelled by gasoline's need for aromatics, probably will remain firm and higher.

16 C&ENNov. 20, 1978

Key Chemicals

p-Xylene • Demand up moderately

• Capacity flat

• Pricing steady

PRODUCTION/CAPACITY

Billions of lb

Production Capacity3

1977 1978 1979 a Nameplate capacity as of first quarter.

HOW MADE

Separated from mixed xylenes recovered at oil refineries or from pyrolysis gasoline produced by steam-cracking ethylene plants

MAJOR DERIVATIVES

Dimethyl terephthalate or terephthalic acid, almost 100 %

MAJOR END USES

Polyester fibers, film, and plastics 100%

FOREIGN TRADE

Exports—up to 15% of production; imports—negligible

PRICES

Contract—12.5 to 13.5 cents per lb; spot market insignificant

COMMERCIAL VALUE

$425 million for total production, 1978

p-Xylene in 1978 is repeating its per­formance of last year. In fact, it may do worse. Capacity has expanded faster than demand by a wide margin. Prices remain relatively low.

Prospects for next year are better because capacity expansion is now zero. Demand is increasing and is ex­pected to increase a little faster in 1979. Prices may not rise except to reflect higher costs for raw material mixed xylenes as competing gasoline demand for mixed xylenes grows.

Slightly better use of nameplate ca­pacity is forecast in 1979 for p-xylene. In 1979, assuming no worse than a minor recession affecting derivative polyester fiber demand, use of p-xylene capacity could come close to 70% of the rated (nameplate) figure, up from less than 65% during 1978.

However, official capacity use for p-xylene reflects just the simplistic quotient of production and nameplate capacity. In 1978 an unusually large part of p-xylene capacity has been down for various reasons. This down time plus much underutilization of capacity com­bined to lower p-xylene production to the point where it could barely meet the needs of the domestic market and ex­ports. As a result, there is currently a spot tightness in the availability of p-xylene.

With this large official overcapacity for making p-xylene, any supply tight­ness can be quickly eased. As a result, the chance of price increases other than to cover increased raw materials costs remains small. On balance, because of p-xylene's low profitability, cycles of shortage and excess are forecast during 1979.

Current prices of p-xylene are so low that imports are negligible and will re­main so through 1979. Imports in 1977 were probably less than 1 % of domestic production. But imports—or rather, the threat of imports—had a major impact on prices. Large quantities of p-xylene in Europe were looking for a place to go and might have come into the U.S. if prices had remained about 18 cents a lb. However, U.S. prices tumbled rapidly with the result that actual imports proved small.

Prices of p-xylene (as well as o-xy­lene) in 1979 will depend heavily on gasoline octane and volume require­ments. If current conditions of rapidly firming prices of mixed xylenes (which contain o-, m-, and p-xylene and ethyl-

benzene) for use in gasoline are leading indicators, then prices for the purified isomers will increase. Some xylenes producers expect an upswing in isomer prices as mixed xylenes prices increase and production problems hit p-xylene units.

Users of p-xylene, particularly poly­ester fiber makers, face competitive pricing problems for their products, too. Hence, they are likely to resist as strongly as possible efforts of producers of intermediate dimethyl terephthalate and purified terephthalic acid to pass through cost increases in p-xylene. The result could be volatile costs, and, pos­sibly, pricing, in the polyester business in 1979, too. Spot shortages of polyester could develop as the result of plant problems for p-xylene (plant problems are sometimes given as a euphemism for unprofitability in p-xylene).

In 1979, nearly all p-xylene produced again will go to polyester fiber, film, and plastics. Fibers are showing moderate gains in demand, which are expected to continue in 1979. This will hold the growth rate for p-xylene to 5 to 6% per year.

p-Xylene's smaller-volume cohort, o-xylene, continues to move along with little fanfare. Its demand remains strongly tied to phthalic anhydride pro­duction, including the relatively large share exported. No other o>xylene use is of much commercial significance.

Production of o-xylene in 1978 has been running at a rate about 1 billion lb per year. This rate does not overtax capacity, which is 40% or so higher than production. Again, production partly depends on factors other than plant capacity, such as feedstock composi­tion and level of p-xylene production.

Production of o-xylene in 1979 likely will grow slowly, probably at a rate below that of p-xylene. Prices also could become more volatile and rise above the current level of about 11 cents a lb, particularly due to efforts to get higher prices for mixed xylenes. Exports of o-xylene may decline in 1979 as a result of domestic price increases.

On balance, the 1979 outlook for p-and o-xylenes seems to be one of unsettled supply and pricing conditions. Conflicting factors of gasoline pool re­quirements and a slowing U.S. economy probably will outweigh other factors in supply and pricing. Average demand growth may be small for the year, pos­sibly less than expectations.

Nov. 20, 1978 C&EN 17