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Supply overhang to weigh on Asian propylene market in 2017



Global Propylene Outlook

By Pamela Sumayao

Supply overhang to weigh on Asian propylene market in 2017



Global Propylene Outlook

By Pamela Sumayao



Asian propylene is likely to face pressure from a supply glut in 2017 with fewer steam crackers scheduled to undergo maintenance and propane dehydrogenation plants that started up in 2015 or early 2016 seeing more stable production, according to sources.


"If operations of PDH units become stabilized, then next year's supply will be more ample," a Japan-based market participant said.


Idemitsu's steam cracker in Chiba, with propylene production capacity of 224,000 mt/year, is scheduled to be shut for maintenance from April to June.


This will be followed by Mitsubishi Chemical shutting its Mizushima steam cracker from May to June. The unit is able to produce 320,000 mt/year of propylene.


Early in H2, the steam cracker in Chiba operated by Mitsui Chemical, which can produce 331,000 mt/year of propylene, will be shut for 40 days of scheduled maintenance.


Compared to maintenance shutdowns in 2016, only half the capacity will be closed in 2017. The crackers which shut this year for maintenance accounted for at least 1.75 million mt/year of capacity.


In South Korea, only two plants are scheduled to shut for maintenance in 2017 -- Korea Petrochemical Industry Corporation's steam cracker, with a propylene production capacity of 230,000 mt/year, in Onsan in April; and SK Energy's No. 1 plant, with propylene production capacity of 140,000 mt/year, in Ulsan in March -- which will shut only a third of the capacity taken offline in 2016.


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In Taiwan, two of five naphtha-fed steam crackers are due to be shut in 2017 for annual maintenance, according to company and market sources. CPC's Lin Yuan 6 plant with a propylene production capacity of 430,000 mt/year and Formosa's Mailiao 3 with a propylene production capacity of 600,000 mt/year will shut in Q1 and Q3, respectively, for maintenance.


The steam crackers which shut this year accounted for only 515,000 mt/year of propylene capacity due to a delay in turnaround at CPC's cracker, which was originally scheduled for December. It has been pushed back to Q1 2017 now.



AMPLE SUPPLY FROM PDH PLANTS

In 2016, new capacity of 1.76 million mt/year was added to the Asian propylene market from three new PDH plants in Northeast Asia.


Another 1.01 million mt/year of capacity is expected to come online in 2017.


Fujian Meide Petrochemical's 660,000 mt/year PDH plant in Fuzhou is slated to startup next year while Tianjin Bohai's 600,000 mt/year Phase II PDH plant will come on stream with a partial startup of 350,000 mt/year. The remaining capacity is targeted for startup in 2018.


PDH plants started making profits in late 2016 due to lower propane prices, after being negative since September 2015. According to a northeastern market participant, propane prices were expected to remain lower than naphtha because of an abundance of supply. PDH producers are expected to take advantage of this and operate their plants at high rates.


These new capacities could weigh on prices next year especially as older PDH units iron out their operational issues and stabilize their run rates, sources said.



DOWNSTREAM PP and ACN

PP demand growth in China rose about 5.5% year on year in 2016 and is expected to remain stable in 2017, according to S&P Global Platts Analytics.


Meanwhile, PP demand growth in India, seen at about 11% this year, was estimated to grow to about 12% next year, according to Platts Analytics.


However, Asian PP capacity growth is estimated to outpace demand growth by 760,000 mt in 2016.


Two notable coal-to-olefins startups this year include China Coal Mengda New Energy's 300,000 mt/year plant in Inner Mongolia's Ordos city and Shenhua Group's 300,000 mt/year CTO plant in Xinjiang.


On December 5, S&P Global Platts assessed both PP Rafia and PP Injection CFR Far East Asia at $ 1,005/mt, up $5/mt on the day.


Meanwhile, ACN saw steep price increases following a force majeure announced by Ineos at its Greenlake plant in July. Naphtha-based ACN producers have been enjoying attractive margins due to wide spreads between ACN and naphtha. The spread hit $970 /mt on September 27, levels last seen on March 8, 2015.


As of November 29, S&P Global Platts assessed the ACN-naphtha spread at $824.50/mt. Producers need ACN to be $450/mt above naphtha for profits.


Several sources said recently that more supply from the US was expected to arrive as Ineos' Greenlake operations are likely to normalize by end December or early January. Participants said that Ineos' supply was expected to arrive in Asia by Q1 -- February or March at the latest. This could weigh on ACN prices. The Green Lake facility has a production capacity of 1 billion lb/year (450,000 mt/year) of ACN.


Asian ACN fell on November 29 with the CFR FEA marker assessed at $1,290/mt, down $11/mt from a week ago, on the back of sluggish buying interest.


Next article: US propylene market eyes more length in 2017



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