Chemical Industry Summary
The conclusion of OPEC’s annual meeting in Vienna on November 30th has touched off a rally in the global crude oil market that has multiple implications for chemicals and regional competitiveness. WTI crude pricing has moved up about US$4/Bbl. on the speculation that an announced OPEC production cut of 1.2 million barrels per day will help re-balance the global oil market and bring down chronically high inventory levels. In addition, according to the IEA, non-OPEC countries have announced cuts of 558,000 barrels per day. If the past is any indicator, implementing these voluntary cuts will prove difficult as each country has priorities and national agendas that require support of oil-based revenues.
Macroeconomics and Geopolitics
Americas
President-elect Donald Trump continues to identify Washington outsiders as nominees for his cabinet ahead of his late January inauguration. If confirmed, this cabinet will have a high proportion of members with business experience including ExxonMobil CEO Rex Tillerson who has been nominated for Secretary of State. The pro-growth legislative agenda for the US is currently being developed and the stock market continues to react positively.
The second estimate for US GDP in the third quarter came in at 3.2%, 0.3% above the first estimate and 0.6% above the original consensus estimate. The Atlanta Fed is now predicting Q4 GDP growth at 2.4%, down from 2.6% previously. The Conference Board forecasts full-year growth of the US economy in 2016 at only be 1.6%and at 2.3% in 2017.
The US jobs report for November came in at 178,000 jobs added, up 36,000 or 20% from the revised October number of 142,000 jobs added. On a YTD basis, the US has added an average of 187,000 jobs per month, and unemployment of 4.6% in November is at a multi-year low.
On December 13th, the Fed raised interest rates for the first time this year by an increment of 0.25%. The Fed has also given guidance that three more potential increases will be considered in 2017.
In December, the US manufacturing PMI index improved to 54.2, a number that represents a 21-month high. Higher pre-production inventories were seen, indicating an upturn in new work is imminent. In November, US auto sales of light cars and trucks were 17.75 million units, continuing a strong trend and flat with the last two months. On a year-to-date basis, US auto sales are flat with 2015.
US housing starts for November were reported at 1,201 thousand on a seasonally adjusted annual basis. This is down only 7% from October’s very strong revised number of 1,286 thousand. On a YTD basis, US housing starts are running 6% ahead of last year. The recent increase in interest rates has pushed mortgage interest rates into the mid-4% area. This increase has been widely anticipated and may be partly responsible for the bump in housing, as buyers try to get ahead of future increases. In its December forecast, the NAR (National Association of Realtors) greatly increased its forecasted housing starts for years 2017 and 2018 to 1.311 and 1.419 million starts. If these predictions are seen, this would represent roughly a 10% per year increase in housing starts for both years. Existing home sales in November were 5.6 million, the highest level in several years. The average housing price for existing home sales in October$232,200, up 5.7% from last year.
Mexico’s PMI in November of 51.1 was in modest expansion territory and was nearly flat with the previous two months. Canada’s PMI of 51.5 recorded in November showed a modest improvement from October with leading indicators such a book orders indication further improvement in the months ahead.
Brazil’s manufacturing sector recorded a November PMI of 46.2 with no leading indicators moving in positive direction. The result is little changed from October’s result of 46.3 and represents the 22ndmonth in contraction territory. The Brazilian economy remains in recession. In its Q4 forecast, the IMF expects Brazil’s GPD to fall 3.2% in 2016, following a 3.8% drop last year. The IMF does not expect a return to 2% growth until 2019.
Europe
The European Central Bank has extended its quantitative easing program beyond its horizon of March 2017 indicating that it would keep buying European debt until at least December 2017. However, the amount of debt buy-back would be reduced from the current level of €80 million per month to €60 million. Interest rates for key deposits are being maintained at a negative 0.4% rate and refinancing rates are at 0%.
The Eurozone’s manufacturing sector activity gained positive momentum in November, and the composite PMI for the region was reported at 53.7, up incrementally from the 53.5 in October. Several countries reported multi-month highs with the lone exception of Germany that reported 54.3, a two-month low. However, German expansion has now been seen for two consecutive years. Greece showed manufacturing contraction for the second month with a PMI of 48.3, representing a 6-month low.
Asia
China’s manufacturing sector continued to show incremental improvement in November. After manufacturing contraction in early 2016, the sector is now in modest expansion territory. The November PMI index was recorded at50.9, following an October PMI index of 51.2. This was the fourth positive month following a 9-month period of manufacturing contraction. China’s auto production in October was 2.59 million vehicles, up 14% from the same month in 2015, and at the highest level all year. The last four months have all showed improved production and sales. On a YTD basis, 2016 is shaping up to be a rebound year for Chinese autos with growth of both indicators up 14%.
Asian commodity prices are influenced by increasing feedstock pricing that has helped offset improved availability and inventories. Thus far in December, Far East Asian HDPE blow modeling prices have recently been near US$1,100/metric ton (MT), not much changed from the beginning of summer. Spot ethylene prices in SEA are currently near US$100/MT, up about US$100/MT since late November on feedstock price movement.
In the last month, spot propylene in SEA has eased an additional US$70/MT to near $660/MT. The total drop of $120/MT in the last two months reflects an improved regional balance. The spread to polypropylene has moved up US$100/MT in the last six weeks to near $300/ton with PP trading near US$1,050/MT. Chinese propylene prices have remained volatile, recently trading in a range of US$800/MT to US$900/MT.
Feedstock – Crude Oil
The scheduled annual meeting of OPEC oil ministers in Vienna that was held on November 30thresulted in an announced target production cut of 1.2 million barrels per day by OPEC members (3.6% of October’s record production of 33.8 million barrels per day). In addition, recent announcements from non-OPEC producers have totaled 558,000 barrels per day. In total, announced cuts represent a potential reduction of approximately 1.8% of total global oil supply and could potentially re-balance global supply in 2017.
However, several important items should be noted. In the past, compliance to production quotas by individual OPEC countries to specific quotas was poor. While officially reported numbers often met targets, independently reported numbers often indicated that actual production levels were in fact higher than those that were published. Also, benchmarks that the cuts are measured against are either recent high levels of production, or targeted numbers, such as the Iran’s post-sanction targets or Iraq’s production goals. CMR believes that compliance with the new targets will be very difficult to achieve in practice.
As of December 13th, WTI spot prices in the US were near US$53 per barrel, up US$9/Bbl from last month. CMR views the recent price movement in global oil as primarily news-flow driven. For the week ending December 2, US crude inventories not in the SPR (Strategic Petroleum Reserve) totaled 486 million barrels, nearly identical to last year, and a month ago. US crude production for this same week as estimated by the DOE at 8.7 million barrels per day, down 5.0% from 2015, but relatively flat with production levels seen in the last four months. Current US crude oil production is down 9.4% from the peak production of 9.6 million barrels per day seen in July 2015. The total reduction of crude oil in the US has been near one million barrels per day as compared to the recent supplier targeted cuts of 1.2 million barrels per day by OPEC.
Drilling and completion activity for oil and gas in the US is accelerating with improving oil prices. For the week ending December 9, Baker Hughes reported that the US total rig count (oil and gas directed) increased by 55 or 10% from last month’s number to 624. Since the beginning of May of this year, the oil-directed rig count is up 40%. Including gas-directed rigs, the total rig count of 569 is also up 54% from the May-2016 low of 404. That number represented the lowest count since this indicator was started in 1991. The elasticity of the price-related response is impressive and may contribute to a prolonged period of poor pricing as the industry can apparently bring on new production rather quickly.
Feedstock – Natural Gas & NGLs
From mid-November to mid-December, US natural gas prices have strengthened by nearly US$1.50/MM BTU. Henry Hub gas prices have recently approached US$3.75/MM reflecting increased inventory draw reflecting the colder-than-normal trend in US weather. The recent firming of gas prices reflects the two most recent weeks that have seen inventory draws near 50B SCF each. However, gas storage is at approximately 94% of capacity and has been dropping about 1% per week.
With the increase in US gas prices, ethane spot prices have moved up to near US$0.25 per gallon. This level is near energy parity, on a US$ per MM BTU basis, with prices for both gas and ethane moving up quickly. For the last several years, US ethane prices have trended on a BTU-parity basis with natural gas. This is due primarily to the abundance of ethane that has required re-injection into natural gas supply. The oil-to-gas price ration dipped to 13.5:1 in mid-December, the lowest level it has been in some time. As a reminder, the economic equivalent price for cracker feedstock is near 8:1. US ethane crackers currently remain advantaged, but not by a large margin as in the near past.
For the week ending December 2, the EIA reports that US propane/propylene inventories were 99.3 million barrels, down 1.5% from last month, and down 1.4% from a year ago, a period that represents peak inventory levels. Inventories are trending down reflecting the recent trend of cold weather in the US and improved export capability. Spot prices for propane are currently near US$0.64/gallon, up about US$0.20 per gallon from last year, reflecting better export volumes and increasing year-on-year crude oil prices.
US Olefins & Polyolefins
US contract ethylene prices for November settled down 5.25c/lb. and resulted in a net transaction price of 26.75c/lb. for the month. The components of this price reflected the softer spot price for ethylene following the conclusion of the US turnaround season. In addition, feedstock pricing was soft, but has continued to increase through November and into December.
US propylene prices settled down 6.0c/lb. in November with contract pricing at US$0.34 per pound for chemical grade and US$0.355/lb. for polymer grade. US contract butadiene prices settled flat in December, after four consecutive months of price increases. Current contract prices are 57c/lb. The cumulative increase for butadiene had been near 10c/lb. in the period August through November.
CMR forecasts that US ethylene cash margins for US light crackers will be US$0.16/lb. in Q4, down about 2c/lb. from Q3 based on higher feedstock pricing and lower average ethylene prices. For heavy crackers, CMR expects cash margins of near $0.10/lb. dependent on crude oil price movement in the quarter.
Following a flat October, US contract PE prices fell 3c/lb. in November. This drop gives back some of the 5c/lb. increase that was seen in September. The November decrease was a combination of seasonal demand decline, improved availability, and flat feedstock pricing. However, recent strengthening of both oil prices and ethane will put pressure on producers to improve pricing.
US exports of PE in October of 384 thousand MT were down 15% from last year due to low inventories and limited availability. On a YTD basis, net exports are will up 14% from a year ago. Total export volumes from the US represent 26% of industry capacity.
US polypropylene exports in November were 89,000 metric tons, down25% from a year ago, down 11% from October, but in-line with the YTD average. Imports of 19 thousand metric tons were at half the level seen in the February through May period when US prices surged, and a strong global arbitrage developed.
Contract prices for US PVC decreased by 2c/lb. in November, offsetting the 2c/lb. increase seen in October. The October was highly unusual coming so late in the year. The current benchmark price for pipe grade PVC is US$0.74 per pound. Thus far in 2016, contract PVC prices have risen a cumulative 8c/lb.US GGPS polystyrene prices also settled down 2c/lb. in November, with the contract benchmark nearUS$0.93/lb. Prices for US contract Benzene in December has rebounded 13c/gal on the strength of higher crude oil prices. The December benchmark contract price is US$2.35/gallon
European Olefins & Polyolefins
For December, European the contract ethylene price settled down €30/MT to a level of €940/MT. Spot prices for ethylene in Europe have softened about US$200/MT in the last two months from near US$1,000/MT to near US$800/MT. Contract European propylene prices were down €30 per metric ton in December, at a level of €725/MT. Spot propylene prices for NWE are currently near €610/MT, at a level near the November average, but down €100/MT from October.
European contact butadiene pricing for December was flat a level of €800/MT. Butadiene contract prices are up 62% from March lows of €495 per metric ton.
The European benzene contract price for December is up €28/MT to a level of €631/MT. European spot benzene has recently tracked increasing oil prices, and is now trading near US$775/MT, up US$140/MT since November 1.
From August to mid-October, polyethylene prices in Europe have started to decline after being flat for nearly three months. HDPE injection molding grade for NWE is in the area of €1,175-1,200/MT on a spot basis. In mid-December, LLDPE spot prices in NW Europe have recently eased €50/MT from mid-October to a level of near €1,135/MT.
Global Chlor-alkali
The US Chlorine Institute reported that the effective operating rate for US chlor-alkali in October was 82%. In response to industry-wide price increase announcements for US caustic, the industry has reported that actual prices have risen for seven consecutive months (through September), although at a pace lower than anticipated. Although $50/ST of price increases still pending, the remaining portion of the increases will likely be implemented in the fourth quarter and into next year due to industry price protection allowed in annual contracts.
Eurochlor recently reported chlorine production numbers for October, with production of 766,000 MT nearly flat with last year. Operating rates were reported at 78% in October. YTD chlor-alkali production is running 3% behind 2015. In 2017, European industry operating rates should improve to the mid-to-upper 80% area with implementation of both permanent shutdowns and temporary shutdowns associated with retrofit projects to convert units to membrane cells. CMR believes that 31% percent of mercury capacity will be shut down, representing 8% of total European chlor-alkali capacity. Only 10% of existing mercury cell plants are undecided at this point, representing 3% of European industry capacity. 60% of mercury cell capacity will be upgraded to membrane technology.
AMERICAS
Braskem to start up new UHMW-PE plant in Texas
Braskem is commissioning its new ultra-high molecular weight polyethylene (UHMW-PE) facility in La Porte, Texas, with scheduled start-up by the end of 2016.
Comments: UHMW-PE is a specialty material with a combination of excellent mechanical properties due to a much higher molecular weight over standard commodity PE. Sheet & profile is the major application for UHMW-PE, where Braskem is mainly active; while UHMW-PE fiber and medical applications are niche markets for certain producers, such as Celanese and DSM. Braskem is the sole local supplier of UHMW-PE in Latin America, with export to North America and Europe. With the new capacity in North America, Braskem can produce cost-advantaged UHMWPE to target emerging markets which drive up the demand for UHMW-PE, such as China and India. The new capacity of UHMW-PE will complement Braskem’ s existing production lines at Camacari petrochemical complex in Brazil. Meanwhile, Braskem has a UHMW-PE pilot plant at its Innovation and Technology Center in Pittsburgh, Pennsylvania. This pilot facility will enhance Braskem’s ability to innovate products, broaden product portfolio, and best serve its customers’ needs.
Braskem evaluating cracker expansion in Brazil
Braskem is considering capacity expansion at its Duque de Caxias gas-fed cracker in Brazil. Duque de Caxias cracker with current ethylene capacity at 540 KTA is planned to nearly double its capacity to 1,000KTA. The proposed project would also include capacity expansion for associated downstream PE facilities. Currently, there is no specific timeframe for a final investment decision to be made.
Comments: Brazil is the largest market for petrochemicals in Latin America. Due to suffering from a two year long recession, Brazil’s PE giant Braskem, which normally sells products domestically, has been exporting its polymers. Braksem is currently in recovery mode but at a slow pace. Meanwhile, its neighbor countries, such as Bolivia and Argentina, are attempting to take advantages of their natural gas resources as well as gain better market positions in global petrochemical industry. The potential investment in the capacity expansion of gas-fed cracker is mainly to keep Braskem stay competitive in the market while waiting for full recovery from recession.
Canada’s Alberta government grants up to US$ 380mln credit to two petrochemical projects
Pembina Pipeline and Inter Pipeline have selected as projects to get up to US$ 380 million royalty credit under petrochemical diversification program. These two projects both are to build propane dehydrogenation (PDH) units with associated polypropylene facilities, while Pembina could receive up to US$228 million credit and Inter Pipeline is granted for up to US$152 million credit.
Comments: Alberta government launched this petrochemical incentive program with the intent to upgrade local petrochemical industry toward high value-added production, thereby boosting local economy without limitation from its geographic disadvantage. Pembina Pipeline with its project partner, Kuwait Petroleum Corp, is tentative to build a propane dehydrogenation (PDH) unit that consumes 35,000 barrels/day of propane and one polypropylene facility with a production capacity of 800 KTA. The complex, still subject to a final investment decision to be made in mid-2017, is slated to start-up in 2020. On the other side, Inter Pipeline recently took over the PDH project that initially proposed by Williams Partner along with Williams Partner’s some Canadian natural gas assets. The PDH unit is designed to produce 525 KTA of propylene with supply agreement in place with Goradia capital for nearby proposed polypropylene facility. With financial incentive given by Alberta government, both selected projects are expected to move forward.
ExxonMobil awards contracts for Beaumont PE expansion
ExxonMobil has let contracts to Jacobs Engineering, Mitsubishi Heavy Industries, and Zachry Group for the Beaumont PE expansion project. The expansion with start-up scheduled in 2019 will boost PE capacity at Beaumont site by 65% to 1,650 KTA.
Comments: Like many other US PE producers, ExxonMobil is attempting to take advantage of cost-competitive shale gas through massive project expansions. ExxonMobil has 1,500KTA cracker and 1,300KTA HDPE/LLDPE facility in Baytown, Texas under construction and has been in talk with its long-time partner SABIC for potential ethylene project in USGC. With massive additional PE capacity coming on-stream in next five years, North America PE suppliers are expected to target foreign markets as important final product destinations, especially to China and Southeast Asian nations.
Dow targets 2022 for ethylene project in Argentina
Dow Chemical plans to make a final investment decision on Argentina crackerwithin12 months. The proposed ethylene project would have a gas-based cracker with a capacity of 1,200KTA and associated downstream polyethylene production. If moving forward, the ethylene project would come on-stream in 2022.
Comments: According to US EIA, Argentina holds 802 trillion cubic feet of recoverable shale gas. Argentina petrochemical players are attempting to take advantage of shale gas. Argentina government has an energy development plan in place through State-ran energy firm YPF, to boosts natural gas production from shale gas resources. The goal is to get 50% of natural gas production from shale gas reserves by 2020. On the side of downstream market –polyethylene, PE consumption for packaging in Latin America is one-third of the average in the developed world. The means that Latin American PE market has plenty of room for growth and posts growth opportunities for Argentina petrochemical players.
EUROPE
SABIC to launch Netherland PP pilot facility in Q1 2017
SABIC plans to begin operation at its new polypropylene (PP) pilot plant in the Netherland. The pilot PP facility will be located in Sittard-Geleen and is scheduled for start-up in March 2017.
Comments: SABIC’s new pilot plant facility, which is dedicated to the development of next-generation polypropylenes, will use gas-phase polymerization technology, and will support the production at nearby full-scale plants of superior materials. SABIC plans to develop grades with improved stiffness/impact, flow properties and other specific secondary properties needed in different industries at this pilot facility. SABIC plans to concentrate on the development of impact grades of polypropylene, as well as random copolymers and homopolymers. It will also carry out experiments on advanced catalysts. The plant will complement pilot plants used by SABIC at other locations and would support the strategic innovation initiatives to address continuously evolving market needs.
MIDDLE EAST & AFRICA
Sasol commissions South Africa C3 expansion project
South Africa’s Sasol has completed capacity expansion at its existing polypropylene (PP) production site in Secunda. Sasol now increases its PP capacity in South Africa by 103 KTA.
Comments: Currently, over 80% of Sasol’s polypropylene in South Africa is export-oriented with major markets including China, South America, Europe, the US and the rest of Africa. According to the statement released by Sasol, the demand for PP in South Africa has grown healthy at 4.1% for the past five years and posts a growth opportunity to Sasol. Sasol’s polypropylene expansion in South Africa is part of its dual-regional, multi-asset hub growth strategy in Africa and North America.
Iran’s NPC to start up Kordestan PE plant in 2017
Iranian state-owned National Petroleum Company (NPC)’s new polyethylene facility in Kordestan is close to completion with start-up scheduled in 2017. The PE facility is designed to produce 300 KTA of low-density polyethylene (LDPE) and the input of the unit will be fed from the West Ethylene Pipeline.
Comments: Iran is dedicated to expanding its domestic petrochemical output in past few years through National Petrochemical Company (NPC), intending to become the largest petrochemical producer by sales values in Middle East area by 2025. West Ethylene Pipeline, stretching from Assaluyeh in southern Iran near the Persian Gulf to Mahabad in northern Iran, and 14 petrochemical plants along the pipeline all are expected to be operational by end of this decade. This allows Iran to fully take advantage of its abundant ethane resources. On the other side, Iran currently has 60 other petrochemical plants in various construction stages, which will increase national petrochemical output to 120,000 KTA, but will need USD 30 billion to complete all of them. US’s lifting Iran sanction has helped unfreeze talks with foreign investors for project development, and the development of Iranian petrochemical projects is expected to accelerate for next few years.
ASIA PACIFIC
Thailand’s IRPC to complete PP expansion in mid-2017
Thailand’s IRPC plans to expand polypropylene (PP) capacity by 300 KTA to 775 KTA by the middle of 2017. The expansion project worth US$ 208 mln aims to boost its long-term earnings growth.
Comments: IRPC, formerly known as Thai Petrochemical Industry Public Company, is a subsidiary of Thai state-owned PTTGC. The company is claimed to be the first fully integrated petrochemical complex in Southeastern Asia with facilities that support the businesses such as deep seaport, tank farm and power plant. In the recent years, IRPC has actively invested in high-value petrochemical products for future earnings growth. In 2013, IRPC initiated upstream projects for hygiene and value-added products (UHV) projects that expand and upgrade production of ethylene and propylene. The UHV completed and started up in July 2016. The PP expansion is part of IRPC’s growth strategy. The growth strategy aims to increase the ratio of high value-added products such as PP in total sales volume to 55% by 2018 and 60% by 2020 from its current level at 42%. Once additional PP capacity is up and running, IRPC will become the largest PP producer in Southeastern Asia.
Sumitomo, Zeon to establish a JV for S-SBR
Japan’s Sumitomo Chemical and Zeon Corp. have agreed to form a joint venture for solution styrene butadiene rubber (S-SBR) through the integration of S-SBR businesses from both parties.
Comments: Zeon Corporation and Sumitomo Chemicals are major companies in the elastomer business with a global presence. The proposed consolidated S-SBR business will be called ZS Elastomers Co. Ltd (ZSE) and is planned to be based in Chiyoda-ku, Tokyo. 60-percent of the new company will be owned by Zeon and 40-percent owned by Sumitomo Chemical. Zeon operates S-SBR plants in Tokuyama, Japan, and Singapore with combined annual capacities of 110KTA, while Sumitomo Chemical plants in Chiba, Japan, and Singapore total 48KTA. This consolidation will not only strengthen the S-SBR business but will also help cater to a wide group of customers in different regions.
Idemitsu, Mitsui to upgrade Chiba cracker for better utilization of LPG
Idemitsu Kosan and Mitsui Chemicals have announced its plan to upgrade their JV naphtha cracker in Chiba, Japan. The upgrading work will improve processing capability of propane by 400% as a mean to fully take advantage of cheap liquefied petroleum gas (LPG). The shutdown for the upgrade is scheduled in the 3rd quarter of 2017.
Comments: Cheap and abundant shale gas in the United States has been a game changer for US petrochemical industry, but also makes US become an exporter of NGL and LPG. US Shale gas exported in the form of natural gas liquid (NGL) and liquefied petroleum gas (LPG) has also been beneficial for petrochemical producers in the areas where natural resources are tight and costly. These affordable NGL and LPG from the United States provide Asian and Western European producers an economical alternative to improve cost structure. For example, INEOS, Shell, ExxonMobil, SABIC have separate plans in place to utilize US shales as feedstock for their crackers in Europe. On the other hand, Idemitsu/Mitsui Chemical’ s plan to increase LPG as feedstock is expected to lead to US$ 8.9 million cost cut a year.
Lotte Chemical to expand ethylene capacity
South Korea’s Lotte Chemical has announced a US$ 2015 million plan to boost ethylene capacity by 200 KTA to 1,200 KTA and propylene production by 100KTA to 620 KTA. The expansion project is scheduled to begin construction in the 1st half of 2017 with commercial operation targeted in 2019.
Comments: Lotte Chemical has recently invested in ethylene capacity expansions and feedstock diversification to become the 7th largest ethylene producer in the world by 2020. The 200 KTA increase at Yeosu is a result of converting the cracker from naphtha to propane feedstock. Propylene output would also increase by 100 KTA. LPG demand in the petrochemical sector in South Korea already jumped significantly in 2016 due to SK’s PDH plant starting up, and Lotte’s switch to propane will require more LPG after it starts up in 2019. Lotte Chemical is also increasing ethylene output through a 90 KTA expansion at its naphtha cracker in Malaysia and through a grassroots cracker in a JV with Axiall in Louisiana.
Korea’s Hyosung Corp considering a polypropylene project in Vietnam
South Korea’s Hyosung Corporation plans to build polypropylene production facilities in Vietnam with a total investment of US$ 1.2 billion. The project will be set up in two phases and be built at the Cai Mep Industrial Zone in Ba Ria VungRau province. The first phase includes an underground warehouse for NGL and one 300 KTA PP facility, while the second will involve building another 300KTA PP unit and a PDH optical fiber plant.
Comments: Hyosung Corporation is a South Korean industrial conglomerate across machinery, IT, construction, textiles and chemical industry. Hyosung’s chemical sector consists of three main focuses –polypropylene (PP) & dehydrogenated (DH) products, purified terephthalic acid (PTA), and packaging. Due to the growing demand for polypropylene in Asia, Hyosung continues to invest in its PP business along with on-purpose propylene production. The company completed its 300 KTA dehydrogenation (DPH) unit in in Ulsan, South Korea in mid-2015, and has a PP capacity expansion in South Korea with scheduled start-up in 2017. The investment in Vietnam is part of efforts to support its fiber business in Vietnam to better serve the textile market in Southeast Asia. Mainly, the Vietnam project along with propylene/ PP expansion in South Korea are strategic moves, aiming to improve its cost structure on C3 value chain as well as enhance vertical integration from propylene to fiber products.
BIO-BASED
Total, Corbin team up for bioplastic
Total and Corbin has established a 50/50 joint venture, which will be headquartered in the Netherland, for the development of bioplastics. The two entities plan to build a 75 KTA polylactic polymers (PLA)at Corbin’s existing site in Thailand.
Comments: Total has partnered with Carbon to expand its presence in bioplastics. The companies are contributing USD 70 million each to the JV, but the majority of Corbion’s contribution is in the form of a lactide monomer production unit that has already been constructed at the site in Thailand. Construction of the PLA polymerization plant started last month and is expected to be completed in 2018. Corbin has developed a portfolio of PLA resins that includes heat resistant crosslinked homopolymer resins that are expected to compete with PS and PP in beverage cups and microwave meal packaging. PLA can also be used in consumer goods, electronics, and automotive applications.
COAL-TO-CHEMICAL
China’s Shenwu to start coal-based PE project in Hebei by 2018
China’s Shenwu Group has let an US$5.77 B (RMB 39.99 B) EPC contract for its proposed coal-based PE facility in Baotou, Hebei. The PE plant will be based on Shenwu’s own proprietary coal-to-acetylene technology and will have a production capacity of 800KTA. The project already began construction with scheduled completion in late 2017 and scheduled start-up in mid-2018.
Comments: The crude oil plunge since 2014 has made Chinese coal-to-chemical industry much less appealing than it was before, which consequently slows the rapid development of Chinese coal-to-chemical industry. With raising environmental concerns caused by coal-to-chemical production, the Chinese government has readjusted its development strategies at a more sustainable pace to address these public concerns. Under 13th Five-Year Plan, Water Pollution Action Plan, and New Environmental Protection Law, China plans to reform coal-to-chemical industry toward being cleaner, more energy efficient, and more value-added on products. Shenwu’s coal-to-acetylene technology emphasizes on better energy efficiency as well as less emission and pollutant than conventional processes. Shenwu Corp. proposes this demonstration project with support from local government. The combination acetylene-route coal process with the production of value-added downstream products such as PE is to tie to the country’s revised development strategies in coal-to-chemical industry. Shenwu also has another two acetylene-derived PE projects under construction in Inner Mongolia and Xinjiang. There is a talk that the Chinese Government has been enacted Tax Preferences that will aspire coal-to-chemical producersfor further vertical integration. Shenwu Corp’s coal-to-PE projects could potentially benefit from Tax Preference.
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