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The PO Problem
Posted on August 3rd, 2017 by Rhian O’Connor in Chemicals Industry News and Analysis
Propylene oxide (PO) is in strong demand, especially for polyurethanes applications, but tight control of the technology is limiting the building of new plants. This could change in the near future as the Chinese launch new production processes.
PO is one of the fastest growing uses of propylene, with production up 3.5%/year from 2010-2016. ICIS forecasts this level of growth to continue for the future, driven by demand for polyols, which is rising nearly 4% a year over the next 10 years according to our forecasts.
Polyols, when combined with isocyanates like methyl di-p phenylene isocyanate (MDI) or toluene di-isocyanate (TDI), make polyurethane foams. These can be in the form of flexible foams for furniture, mattresses, car seats, etc, or rigid foams, which are mainly used for insulation.
Non-foam polyurethane is also growing in importance for applications like coatings, binders, as well as replacing thermoplastics in some applications like car bumpers, and electrical items. Polyurethanes are extremely versatile and can be tailored to the application. The product is formed on site and this means low-cost tooling and short lead teams.
Growth in emerging markets is driven by flexible foam for use in mattresses as modern furniture takes share from more traditional materials.
Polyols use increased by more than 8%/year in the 2010-2016 period in areas like Africa and South and Southeast Asia, according to ICIS forecasts.
However, in developed markets, growth is also good, driven by better insulation in housing and white goods as well as the development of new applications in a wide number of end markets. Polyurethane insulation has the highest thermal resistance for a given thickness and lowest thermal conductivity.
Polyols are relatively easy to make. Production is usually local and fragmented. Building a new polyether polyols unit is relatively easy and low cost. However, availability of raw material PO is more problematic.
ICIS estimates the global operating rate for PO at 87% in 2017, compared to only 70% for polyether polyols. Given the forecast growth rates, we need to build more PO units to satisfy demand. But planned plants are few and far between with technology limitations strong.
There are essentially three generations of PO plant technology
- First generation: Propylene chlorohydrin route. These plants convert propylene to propylene chlorohydrin which is then de-chlorinated. This process is problematic. It is highly polluting in terms of waste calcium chloride. It also needs significant amounts of chlorine which is usually energy inefficient to produce.
- Second generation: Newer plants oxidize propylene with an organic peroxide. These include tert-butyl hydroperoxide, and ethylbenzene hydroperoxide. However, there are by-products – t-butyl alcohol (TBA) for making methyl tert-butyl ethyl (MTBE), or ethylbenzene for styrene production. This makes the investment decision more complex – the dynamic for MTBE and styrene are different to PO.
- Third generation: In 2006 Sumitomo developed a method using oxidation by cumene hydroperoxide. The by-product cumyl alcohol can be recycled back to cumene. This was followed in 2008 by a new technology oxidising the propylene with hydrogen peroxide, with the only by-product being water. This was simultaneously developed by Degussa-Uhde (now Evonik) and BASF/Dow.
The environmental and economic problems with the first generation chlorohydrin technology are not insignificant. Most of these plants were built in the 1960’s and 1970’s and the only new chlorohydrin plants to have been built since 1990 are in China.
Even the construction of these has slowed in recent years. Shandong Sanyue has just opened its third chlorohydrin unit in Wudi, with a capacity of 80,000 tonnes/year. This plant was originally planned in 2016 but was delayed due to environmental permitting concerns. Since 2010, at least 175,000 tonne/year of chlorohydrin capacity has closed in China.
So what about the second option – plants that produce either styrene or MTBE as a by-product?
POSM (propylene oxide-styrene monomer) technology, in particular, is widely available in Japanese, Spanish, Russians and Chinese producers developing their own version of the technology originally developed by Lyondell (ARCO), and Shell. Fourteen POSM plants now exist globally.
The problem with POSM plants is that styrene demand is not growing as fast as PO: consumption of styrene increased by only 1.7%/year from 2010-2016, whereas demand was up by 3.7%/ year according to ICIS data.
In areas like India or China, where styrene demand is still growing and the country is short of product, building a POSM unit makes sense. In the US, which is long styrene, we see no potential for new POSM units.
In January this year, Shell pulled out of its Saudi joint venture SADAF. This move was seen by many as lessening the chance of a Middle Eastern POSM unit – at least in the near-term.
So what about a PO/TBA plant? The technology for this is held fairly tightly by LyondellBasell which bought technology holders ARCO chemical, and Huntsman. There are only five plants globally: two in the US, two in Europe and one in China. A sixth in China will open imminently: a 240,000 tonne/year unit in Nanjing, jointly owned by Huntsman and Sinopec. Another new plant is under consideration in the US, according to LyondellBasell.
These PO/TBA plants actually produce around twice as much TBA as PO – so the market for MTBE has to be as much, or more of, a concern than PO.
By product, MTBE is in demand in some regions, especially in China where it is high demand as an octane-booster in gasoline. It has a number of advantages over other octane boosters including lower benzene and formaldehyde content as well as lower volatile organic component content.
MTBE has been banned as a fuel additive in the US because of groundwater contamination, but we expect increased demand in other regions due to the push globally for cleaner automotive emissions.
Sumitomo’s cumene hydroperoxide technology has not taken off to the extent the company hoped.
To date there are only two plants globally – the original one in Japan and a PetroRabigh (Saudi Aramco/ Sumitomo joint venture) in Saudi Arabia launched in 2009.
Another two are planned to open in Asia, with licenses from Sumitomo. One will open in 2018 in South Korea, operated by S-Oil (part owned by Aramco). The second is in Thailand, operated by PTT Global Chemical and due to start in 2019.
According to industry insiders, this process is complex and costly and has been a little overshadowed by the newer, more efficient HPPO process.
Hydrogen peroxide propylene oxide (HPPO) is a relatively simple process with few by-products. As such, it is seen as the most modern, cost efficient process.
It was simultaneously developed by BASF/Dow and by Degussa-Uhde. Degussa-Uhde claim the first plant – built in 2008 by SK Chemicals in Korea. This was very shortly followed by a BASF/Dow plant in Antwerp also in 2008.
More plants came from BASF/Dow – a plant in Thailand in 2011, and a Dow joint venture Sadara Chemicals opening in Saudi Arabia in 2017.
Degussa-Uhde (now owned by Evonik) sold the technology under license, to Jishen Chemical industries in Jilin, China (from 2014). However, a couple of Chinese players are working on their own HPPO technologies and this could be a game changer for the PO market.
The first of these was Dagu Chemicals – a chlor-alkali producer with an existing PO chlorohydrin plant. In 2010 it started a pilot plant of 15,000 tonnes/year to test the company’s proprietary HPPO technology.
We understand a larger scale plant is planned, with a capacity of 200,000 tonnes/year. However, the company is currently experiencing regulatory problems and authorities plan to force a move to a new industrial zone outside the city by 2020, after the major explosion in Tianjin in 2015. This could slow down construction of the new plant.
Sinopec has also developed an HPPO process. It opened the first HPPO plant in 2015 – in Yueyang (Sinopec Changling) with a capacity of 100,000 tonnes/year. However, many in China claim the quality of output is poor – certainly not good enough to make polyols.
Another Chinese player, Nanjing Hongbaoli, a big producer of polyols, is said to be opening a 120,000 tonne/year PO plant this year using proprietary technology.
The company has declined to disclose the production process involved but states that it is not HPPO technology according to some sources. Others say that it is an improved version of HPPO. Some sources also believe the technology will be used by other Chinese players.
The Chinese government is promoting the HPPO route of PO production and announced in November 2015 that the export of PO produced via the HPPO route using imported propylene will be exempted from 17% VAT (value added tax) and import duties on imported propylene.
However, only Jishen is capable of exporting PO and costs have prohibited it from doing so to date.
It will be interesting to see what the future brings for PO.
If Chinese players are successful in developing their own HPPO technology, this could lead to a new wave of PO plants and a loosening of supply.
We also see some new TBA and POSM plants – particularly in areas like China and India where more MTBE and styrene are needed.
Rhian O’Connor is a Senior Analyst in ICIS Consulting covering the styrene and propylene oxide chains. She is responsible for the ICIS supply/demand database for these products as well as single client work on these topics.
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