will new chinese propylene oxide (po) technology...

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WILL NEW CHINESE

PROPYLENE OXIDE (PO)

TECHNOLOGY IMPACT

THE WORLD BALANCE?

RHIAN O’CONNORSENIOR ANALYST,

ICIS CONSULTING AND

ANALYTICS,

LONDON

www.icis.com 2

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Corporate Structure

35years in petrochemical

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More than

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Agenda

What are the PO technologies in China?

Will PO production in China match consumption?

Will this impact world supply balance and trade?

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The Technologies

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PO Technologies

First Generation Second Generation Third Generation

Technologies Propylene chlorohydrin

Propylene oxide styrene monomer (POSM), Propylene oxide t-butyl alcohol (PO-TBA)

Cumene hydroperoxide, hydrogen peroxide

AdvantagesWidely available technology

Cleaner, economical to run with lowest cashcosts

Clean, large plantswith low capital costs

Disadvantages

Dirty, small, needs access to chlorineFines for environmental non-compliance

By-products styrene and MTBE which may not be easy to sellHigh capital costs

Licences tightly held, cash costs higher than second generation

No of plants in China2010 – 152020 - 22

2010 – 22020 - 8

2010 – 02020 - 8

Source: ICIS Consulting

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Cash costs per technology

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

$/t

on

ne

Cash costs - NE Asia

Hydrochlorin POSM HPPO TBA

Source: ICIS Consulting

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PO supply from each technology

-

500

1000

1500

2000

2500

3000

3500

4000

4500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Tho

usa

nd

to

nn

es/y

ear

Chinese PO production by route

Chlorohydrin POSM TBA HPPO Other

Source: ICIS Petrochemicals Supply/Demand Database

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China – POSM plants

Date Operator Capacity (kta)

Location Licence holder

2006 CNOOC Shell 320 Huizhou, Guangdong

Shell

2019 CNOOC Shell 320 Huizhou, Guangdong

Shell

2010 ZRCC Lyondell 285 Zhenhai, Zhejiang Lyondell / Arco

2022? ZRCC Lyondell 285 Zhenhai, Zhejiang Lyondell / Arco

2022 North Huajin Chemical Industries 200 Panjin, Liaoning Repsol

2022? Dagu Chemical 200 Tianjin, Tianjin Repsol

2020 Sinochem Quanzhou PC 200 Quanzhou, Fujian Chinese tech

2020 Wanhua Chemical 300 Yantai, Shandong Chinese tech

2019 Dongming Zhongxin Guoan Ruihua New Material

80 Heze, Shandong Chinese tech


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China – HPPO plants

Date Operator Capacity (kta) Location Licence holder

2014 Jishen Chemical 3 x 100 Jilin, Jilin Evonik/Degussa-Uhde

2021 Jishen Chemical 100 Jilin, Jilin Evonik/Degussa-Uhde

2015 Sinopec Changling 100 (Running intermittently)

Yueyang, Hunan Chinese tech

2018 Sinopec Jinling 200 Huaian, Jiangsu Chinese tech

2019 Blue Planet Eco Materials 400 Changzhou, Jiangsu Chinese tech

2020 Jiangsu Yida 150 Taixing, Jiangsu Chinese tech

2023? Jiangsu Yida 200 Taixing, Jiangsu Chinese tech

2020 Fujian Gulei 300 Zhangzhou, Fujian Unknown

2021? Shangdong Huatai 200 Dongying, Shandong

Chinese tech


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China - challenges

Can Chinese tech plants produce good quality material?

A number of China tech HPPO pilot plants have been set uphistorically e.g. Dagu - unsuccessful

Sinopec HPPO process – quality not good enough for polyols

Main test of HPPO is the Blue Planet Eco Materials 400,000tonne/year plant. The licence is from the Dalian Institute of ChemicalPhysics and the Chinese Academy of Science

The Chinese government is promoting the HPPO route of POproduction. In November 2015, it announced that imported propyleneused in the export of PO produced via the HPPO route will be exemptfrom 16% VAT (value added tax) and import duties.

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China - challenges

Can Chinese tech plants produce good quality material?

POSM units similarly unknown quality PO – first to start in 2019maybe?

Smaller PO to styrene ratios

BUT styrene prices are supported by anti-dumping duties (ADDs)introduced from February 2018

Hong Bao Li’s technology is unknown. Start up of 120,000tonne/year plant has been delayed now maybe Q4 2018

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China’s PO supply balance

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China – huge consumer, still short

-

20

40

60

80

100

120

-

1000

2000

3000

4000

5000

6000

7000

8000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Tho

usa

nd

to

nn

es/y

ear

China PO SD balance

CAPACITIES Production Consumption Utilization Rate


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China – huge consumer, still short

0

500

1000

1500

2000

2500

3000

3500

4000

4500

5000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Tho

usa

nd

to

nn

es/y

ear

PO Consumption

POLYETHER POLYOLS PROPYLENE GLYCOLS GLYCOL ETHERS MISCELLANEOUS


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China – balance assumptions

Increase in capacity either increase in production or fall in rates

We have assumed operating rates fall – why?

Unknown quality and reliability of new plants

High number of old, dirty chlorohydrin plants with strongenvironmental regulations

Growth in modern supply in Thailand, South Korea – smallerexport markets

We have kept a small but decreasing trade deficit in China

Picture could change with measures like ADDs or if a lot of older plantsshut

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Impact on World

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China - trade

(600)

(500)

(400)

(300)

(200)

(100)

-

2010 2012 2014 2016 2018 2020 2022 2024

Tho

usa

nd

to

nn

es/y

ear

China PO SD balance

Production - Consumption

China imported 230,000 tonnes of PO in 2017


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China - trade

BRAZIL

SAUDI ARABIA

THAILAND

UNITED STATES

OTHERS

0

50

100

150

200

250

Tho

usa

nd

to

nn

es

PO imports into China 2017


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Asia and Global Balance

60

65

70

75

80

85

90

95

100

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Global PO operating rates

AVERAGE NORTH EAST ASIA ASIA AND PACIFIC


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-

2000

4000

6000

8000

10000

12000

14000

16000

18000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Tho

usa

nd

to

nn

es/y

ear

Global PO capacities

NORTH AMERICA EUROPE NORTH EAST ASIA ASIA AND PACIFIC REST OF WORLD


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0

500

1000

1500

2000

2500

3000

3500

4000

4500

2018 2019 2020 2021 2022 2023 2024 2025

Tho

usa

nd

to

nn

es

New capacity post 2017

China South Korea Saudi Arabia India Thailand Hungary United States


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Conclusion

A lot of Chinese PO to come online using untried ChinesePOSM/HPPO or other techs

The reliability and quality of product is yet to be seen

It is likely to lead to a dip in operating rates although we believeChina will still be a net importer

Global operating rates could also weaken as units come online inThailand and India

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Rhian O’Connor

Senior Analyst

ICIS Analytics & Consulting

Tel: +44 79 2007 8331

Email: [email protected]

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