Propylene & Polypropylene development - Platts · Propane dehydrogenation economics Polypropylene Global supply/emand balance North America’s growing deficit Impact on pricing,

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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


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


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


Petrochemicals




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Fall in crude returns competitiveness to naphtha

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Jan-11 Aug-11 Mar-12 Oct-12 May-13 Dec-13 Jul-14 Feb-15 Sep-15 Apr-16 Nov-16

$/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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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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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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0

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70,000

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

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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


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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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

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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]

mailto:[email protected]

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Propylene & Polypropylene development - Platts · Propane dehydrogenation economics Polypropylene Global supply/emand balance North America’s growing deficit Impact on pricing,