propylene & polypropylene development - platts · propane dehydrogenation economics...
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Propylene & Polypropylene development: What’s the holdup?
Bernardo E. Fallas
Associate Editorial Director, Americas Petrochemicals
S&P Global Platts
November 2, 2017
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Agenda
2
Propylene at a glance
Supply/demand dynamics
Spot vs. Contract pricing & trends
Expansions: Expectations vs. reality
Propane dehydrogenation economics
Polypropylene
Global supply/emand balance
North America’s growing deficit
Impact on pricing, competitiveness
Americas & its feedstock dilemma
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Key global trends
Private & Confidential 3
• Lower crude oil prices and impact on petrochemical feedstocks
• Lower oil has meant difference between liquid and gas feedstocks has narrowed
• Global ethylene production cost curve has flattened
• US shale-fueled projects • US pushes ahead with ethane-based projects, with first wave hitting H2 2017
• Ethane exports have given other regions options and outlet to cheaper feedstock
• Propane-based propylene expansions limited; many projects on hold/shelved
• European olefin feedstock slate structure • US ethane will make only a small difference to cracker feedstock slate
• Naphtha-based margins hit record highs this year
• Propane dehydrogenation (PDH) and Asian olefin structure
• US will export much of its propane production; key outlet will be Asia for PDH plants
• However, Asia’s olefin industry will be dominated by naphtha despite growing use of other feedstocks such as coal and methanol
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CTO/MTO projects: China at the forefront
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Global PDH projects at a glance
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Feedstocks: Ethane, naphtha still lead the way
6
28%
18%
14%
37%
3%
Global Additions by Region
North America
Middle East
Europe
Asia
Africa
17%
2%
3%
37%
40%
1%
Global Additions by Feedstock
CTO/MTO
Butane
Propane
Naphtha
Ethane
Other
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Propylene expansions – Americas
Private & Confidential 7
Company Location Capacity (mt/yr) Startup
Dow Chemical Texas 750,000 (PDH) T4 2015
Enterprise Products Texas 750,000 (PDH) T4 2017
Formosa Plastics CUSA Texas 700,000 (PDH) 2020-2021
Pembina Pipeline/PIC Alberta, CAN 545,000 (PDH) Decision delayed
Inter Pipeline Alberta, CAN 525,000 (PDH) Decision delayed
BASF Texas 475,000 (MTP) Decision delayed
Sunoco Logistics Pennsylvania TBD (PDH) Decision delayed
Company Location Capacity (mt/yr) Startup
Reficar/Ecopetrol Cartagena, COL 5,000 b/d (FCC) 2016
YPFB Tarija, BOL 250,000 (OPP) 2021
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Now arriving: Enterprise Products Partners
Private & Confidential 8
Location: Mont Belvieu, Texas
Process: PDH
Capacity (propylene): 750,000 mt/yr
Feedstock: Propane (35,000 b/d)
% completed: 100%
Anticipated startup: T4 2017
Integrated demand: None; customers
to include Eastman, Braskem
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Company Location mt/yr Startup
C3 Petrochemicals Texas 1,200,000 (PDH) Shelved
Dow Chemical (II) USGC TBD (PDH) Shelved
Enterprise Products (II) Texas TBD (PDH) Shelved
Rextac Texas 300,000 (PDH) Cancelled
Other US projects no longer with us
Private & Confidential 9
Petrochemicals
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Fall in crude returns competitiveness to naphtha
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$/mt Global steam cracker margins
Asian Naphtha Spread US Ethane Cracker Margin NWE Cracker (Naphtha based) Margin Spot MAvg
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US ethane cracker margins weakest since 2011
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Ethane Cracker Margin NWE Cracker Margin Spot Asia Naphtha-Ethylene Spread
Global steam cracker margins
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Propane: Hits 3-year highs on export demand
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$/M
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Henry Hub Natural Gas
Propane non-LST MtB Pipe
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US cracker margins: Propane loses luster
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Ethane
E/P Mix
Propane
Light Naphtha
Cts
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Propylene: Long but Q3 sees upward pressure
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Cts
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RGP FD USG
PGP FD M1
PGP Dlvd USG CP
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Harvey impact – by the numbers
9 – Texas ports that experienced closures
15
17 – Major petrochemical complexes affected
20+ – % of refining capacity idled because of storm
58 – % of polyethylene capacity offline at peak
60 – % of US ethylene capacity offline at peak
14 – Producers with confirmed force majeure declarations
3 – Major railroads that suspended service in SETX
1 – Plant fire resulting from storm/flooding (Arkema)
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One month later…
• <5% of ethylene capacity impacted
• <3% of refining capacity affected
• <5% of PE capacity idle
• Most PP production online, unaffected
• UP, BNSF, KCS re-open service
• All major ports operational
• Minimal delays to PE projects
• Startup of CP Chem cracker delayed
16
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Exports hit record highs, grow nearly five-fold
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JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2016
2017
mt
US propylene exports (USITC)
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Asia, Europe, Latin America among destinations
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PGP FD USG
PGP FOB Korea
PGP CIF NWEurope
$/m
t
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Ethylene: US lowest-priced region due to length
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Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17
$/m
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Ethylene FD USG
Ethylene CFR NE Asia
Ethylene FD NWE
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Polypropylene: Americas structurally short
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Beyond PE, limited growth in resin space
Private & Confidential 21
Compañía Producto Ubicación Tm/año Arranque
Shintech PVC Louisiana 360,000 TBD
Compañía Producto Ubicación Tm/año Arranque
M&G PET Texas 1,100,000 T4 2017
Company Product Location Capacity mt/yr Startup
Braskem Americas PP La Porte, Texas 450,000 2021
Formosa PCUSA PP Texas 250,000 2021
YPFB PP Tarija, Bolivia 250,000 2021
Inter/NAPP PP Alberta, CAN 450,000 TBD
Pembina PP Alberta, CAN 545,000 TBD
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Latin American PP constrained by feedstock
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PP exports fall as US pricing uncompetitive
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0
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JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
2016
2017
US polypropylene exports (USITC)
mt
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US PP: Supply, arbitrage opportunities limited
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PP Homo FAS Houston Wavg
PP Inj CFR FE Asia Wavg
PP Homo CFR WCSA Weekly
PP Homo Inj CFR Brazil Weekly
$/m
t
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Key takeaways
25
• US market has gone from balanced-to-tight to balanced-to-long
• Drop in oil prices, volatility in propane have curbed PDH expansions
• Length stabilizes propylene pricing; exports hit record highs
• Strong propane prices prop up propylene in Q3, then Harvey hit
• Contract pricing jumps 8.5 cents/lb in September/October
• Downward trend expected for rest of Q4; all eyes on Enterprise PDH
• Region to be structurally short PP due to feedstock constraints
• US importing more PP as exports fall amid domestic demand
• High domestic PP prices in North America attract imports (see 2016)
• High export pricing resulting in loss of competitiveness in Latin America
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Thank you! Questions? Bernardo E. Fallas Associate Editorial Director Americas Petrochemicals (713) 655-2214 [email protected]