Chemical Industry Summary
The first quarter of the 2016 financial reporting season has been concluded with results generally consistent with forecasts. US-based paint and home supply companies generally reported improved results on a year-on-year basis, with high gross margins due to a benign raw material cost environment. Commodity chemical producers report softer year-on-year revenues but despite lower revenues, were generally able to hold on to favorable margins.
In its April update, the IMF trimmed its forecast for global 2016 GDP growth estimate by 0.2% to a modest 3.2%. Global risks include a potential return of the Greek debt crisis by as early as July, continuing stagnation of the developed economies of the US and Europe, slowing of Chinese GDP and demand, economic contraction, and increased political instability in Brazil.
Macroeconomics and Geopolitics
US
The US economy has once again gotten off to a slow start for the year. The initial official estimate for Q1 GDP growth is only 0.5%, very close to the GDP in the first quarter of 2015. Most forecasts for US GDP growth in 2016 are in the range of 2.0 to 2.5%. The Conference Board forecast calls for US GDP growth at 2%.
In April, the US jobs report indicated poor results with only 160,000 jobs added, the lowest rate since September 2015. Some economists caution not to overreact to a one-month figure, but if this job addition rate is maintained, it could portend a slower US economic growth outlook for 2016. The average job addition rate for the first quarter was 210,000 per month, close to last year’s average. The loss of jobs in the energy-related industry continues but appears to be slowing.
In April, the US manufacturing PMI index softened to 50.8 from the 51.5 recorded in March. This result is barely in expansion territory and is even below the 38-month low of 51.2 recorded seen December 2015. The US PMI index has declined four of the last six months. In April, US auto sales of light cars and trucks were 17.32 million vehicles, rebounding 5.2% from a slower March. On, a year-to-date basis, US auto sales are up 3.7% from 2015, a year that saw a 5.6% improvement from 2014.
During the first quarter, US housing starts averaged 1.133 million, up a healthy 16% from the same period last year. Mild weather has helped, and the lower inventory of existing homes has also been a positive factor. Sales of existing US houses in March were 5.33 million, up 5% from February. The average price for existing homes was US$222,700 up 5% from last year. In its March forecast, the NAR (National Association of Realtors) projects 2016 starts of 1.208 million (up 8.6% from 2015), and for 2017 it is forecasting 1.32 million starts (up 9.3% from the 2016 forecast).
Europe
In its April forecast, the IMF is forecasting that annual European GDP growth will stay very near 1.5% for the remainder of the decade. The quantitative easing program of the ECB continues to be implemented. The program, launched in early 2015, includes the purchase of €1.5 trillion of debt to inject cash into the economy and to promote growth-related borrowing. Targets currently approved include increasing bond purchases by € 10 billion per month and lowering interest on cash deposits to perhaps a negative 0.4%.
The next major issue facing Europe is the June 23 referendum for Britain to leave the European Union. Although estimates for the economic impact on the UK vary, the overall effect is considered to be negative for Britain’s economy. However, Britain could potentially save US$ 12 billion that it currently contributes to the EU budget.
The reported April PMI index for the Eurozone was reported at 51.7, nearly flat with the performance of the last few months and barely in expansion territory. Manufacturing in the southern European countries, Italy and Spain, is improving while the larger industrialized countries of Germany and France are encountering low growth conditions.
Manufacturing activity in Eastern Europe continues to soften. Russia’s PMI fell again in April to a level of 48.0, down from the result of 48.3 in March. Poland’s April PMI in April fell sharply to 51.0, down from a 53.8 level in March. This was the second largest drop since November of 2008.
Asia
China’s manufacturing sector remained near zero growth in April with a manufacturing PMI index of 49.4 compared to a result of 49.7 in March. This was the 14th consecutive month for the PMI to be in contraction territory. As part of officials’ attempt to re-balance the economy away from exports and investment-related growth and towards domestic consumption and consumer demand, calls for stimulus spending represent a return to the old approach. China’s auto production and sales through February 2016 have reflected the continuing slowdown of domestic demand growth. Compared to last year, both indicators are up about 4% on a YTD basis. However, in the prior three years, Chinese domestic auto production and sales were up by an average of about 9% per year.
Feedstock – Crude Oil
WTI Crude oil prices have rallied nearly 70% from mid-February lows and are now above US$45 per barrel. There is a wide range of forecasts on crude prices in 2016, with some near-term forecasts predicting below US$30 per barrel in the second half of this year. However, for the time being, bullish positions outnumber bearish positions by a significant margin. Several oil-producing nations have recently discussed holding crude production to January levels, but OPEC and Saudi Arabia continue to produce at near-record levels. The market appears to be reacting to incrementally positive news while discounting fundamentals including very high inventories and the continuing imbalance between supply and demand. Recent NYMEX futures prices have pushed the near-term monthly prices up to near US$45/Bbl, but the future price for December 2016 remains below US$50 per barrel.
According to the DOE, US crude production in April was 8.9 million barrels per day, down 1% from March and down 5% from the peak set in April of last year. Crude produced from the Eagle Ford shale formation has recently edged down, but production from the Permian area continues at high levels. For the week ending April 29, the EIA reported that US crude oil stocks not in the SPR (strategic petroleum reserve) hit a record level of 543.4 million barrels, up 12% from a year ago. The most recent report saw a reversal of the trend with inventories dropping 3.4 million Bbl.
Feedstock – Natural Gas & NGLs
Henry Hub natural gas spot prices continue to trade near US$2.00 per million BTU and have been relatively stable compared to crude oil. One key concern for producers is the persistently high inventories of gas relative to historic norms for this time of the year. The EIA published the weekly gas report for the week ending May 6 that reported underground inventories at 2,681 billion SCF. This is about 2% higher than the prior 5-year maximum level and represents nearly 65% of the working storage capacity volume. The month-ending April inventory level was 20% higher than a year ago and 15% higher than April 2014 levels. The winter withdrawal season ended in early April with underground inventories over 50% of system capacity. This increases the risk of oversupply should the US see a relatively mild summer season or a late onset of the winter withdrawal season. Spot prices for gas in the Marcellus area have rallied a bit too near US$1.40 per million BTU. NYMEX future gas prices for December 2016 are near US$2.40/MM BTU, approaching levels seen at the beginning of the year.
Ethane prices increased about 3 cents/gal throughout April to slightly over US$0.20/gal before retreating to just below this benchmark at month’s end. INEOS’ first shipment of ethane to the Rafnes cracker in Norway was unloaded in late March representing an export of 30,000 Bpd or around 2% of the US total. Enterprise’s new ethane export terminal is expected to be completed by the late Q3 of this year and will ship approximately 200,000 Bpd of ethane at full capacity. These quantities are well below the currently rejected ethane volumes of 500-600,000 Bpd but cumulatively should put upwards pricing pressure on this cracker feedstock.
For the week of May 6, the EIA reports that US propane/propylene inventories have increased to 73.1 million barrels, up 8% from last month, but down 31% from the record of 106 million barrels set last November. Propane’s use as a fuel eases in the spring season. Lower year-on-year inventories are attributable to the start-up of a new LPG terminal capacity in December. Spot propane prices have eased up to near US$0.50 per gallon, following the improvement in crude pricing.
US Olefins & Polyolefins
The Q2 cracker turnaround season in the US is especially heavy and producers have been increasing polyolefin inventories to help bridge demand requirements. CMR estimates that including unplanned outages, total cracker downtime will average 8.2% of US industry capacity in Q2. This, along with increasing feedstock prices, should help support PE prices (see below). US contract ethylene prices for April have now settled up 0.75 cents/lb to 27.0 cents/lb on a net transaction price basis. This is up 5.75 cents/lb from the January price of 21.25 cents/lb which was at a 13-year low. Spot ethylene prices eased down in May to near 25.0 cents/lb.
The important oil-to-gas price ratio has recently increased to the area of 23:1 from levels of 20:1 seen earlier this year. Compared to the strong oil-to-gas price ratios seen in 2012 through early 2014, the reduction of this ratio has eroded North America’s competitive advantage in the ethylene chain.
US propylene prices settled up 1.0 cents/lb in April following an increase of 1.5 cents/lb in March. The April chemical grade contract price is 31.0 cents/lb with polymer grade at 32.5 cents/lb. In March, Dow Chemical’s new 750KTAPDH unit in Freeport, TX took a planned outage to repair an exchanger and has since been restarted. Enterprise has announced the delay of the start-up of its new 750KTAPDH project. This project is now expected to come online in the second quarter of 2017 instead of the end of the year 2016. US contract butadiene prices have settled up 2-3 cents/lb for May, following international price trends. Current contract pricing is nearly 33 cents/lb, roughly half the level seen in mid-2014.
US polyethylene producers continue to run at full rates and integrated margins for PE remain strong, if not a peak levels. It appears that producers have implemented a 4 cents/lb price increase in April. This follows a 5 cents/lb increase in March that offset a 5 cents/lb erosion of prices in January and February. The April price increase was supported by strengthening feedstock pricing and firm demand ahead of planned outages in Q2. Margins for integrated PE producers are in the range of US$0.20-US$0.25 per pound, depending on grade. Some of the planned Q2 outages, including LyondelBasell’s Corpus Christi and Westlake Chemical’s Petro #1 outage in Lake Charles, are associated with capacity increases for ethylene.
US PE exports have shown strong performance on a year-to-date basis through March. At an average of 460,000 metric tons (MT)/per month, exports are running 30% ahead of last year. Import volumes for all PE grades are relatively flat, averaging 550,000 MT per month.
In April, US PP prices were down in the range of 3-5 cents/lb as importers took advantage of strong regional arbitrage with increased imports. With propylene monomer up a penny, PP margins have edged downwards, but are still at strong levels. PP imports were 86 million pounds in both March and February, and YTD import volumes are up 160% over last year.
After seven months of flat or declining pricing prior to March, US contract PVC prices improved by 2 cents/lb in April and were up 4 cents/lb in March. Polystyrene prices in April were up 5 cents/lb, but following a 10 cents/gal drop in US contract benzene prices, May PS prices are expected to be relatively flat.
European Olefins & Polyolefins
For May, European the contract ethylene price increased by €40/metric ton (MT)to a level of €910/MT. This was primarily due to recent crude oil price strengthening also spurred by improving demand for derivatives. After increasing nearly €90/MT in April, film grade HDPE is currently near €1,300/MT on a spot basis, down approximately €40/MT in the last week.
European contract polymer grade propylene settled improved €15/MT in April, to a level of €635 per MT. European PP homopolymer prices have improved by €100/MT from March and now are relatively flat near €1,100/MT. Contract butadiene prices for May settled at €620 per MT, up €35/MT from April.
Asian Olefins & Polyolefins
Ethylene prices in NEA are currently near US$1,200 per MT. They have been at this level since mid-March when they increased by US$50/MT following global crude price inflation. Ethylene prices began the year near US$1,000/MT. The current price for ethylene reflects the strengthening of regional naphtha which is up 26% from March lows to a level of US$385/MT. Prices for LLDPE in SEA have been relatively flat since March and now are in the US$1,100 to US$1,150 per MT range.
Global Chlor-alkali
Global Chlor-alkaliThe Chlorine Institute reported that effective operating rates for US chlor-alkali in March averaged 84%, nearly flat with February and up 3% from last year. On average, ECU prices were down in the first quarter, but by the end of March, had rebounded to flat from the start of the year. For the second quarter, producers have announced three successive caustic price increases for April, May, and June that total US$85/short ton (ST). For chlorine, a US$20/ST increase has been proposed for April.
Olin has announced that it will be shutting down 433,000 short tons(ST)of capacity by the end of the first quarter of 2017. According to various reports, these shutdowns include Freeport, TX (220,000 ST), Henderson, NV (153,000 ST), and Niagara Falls, NY (60,000 ST).
Westlake Chemical’s hostile bid for Axiall continues with the company nominating an alternative board of directors to be voted on in the upcoming annual meeting to be held on June 17. On April 4, Westlake Chemical announced that it was increasing its bid for Axiall to US$14 per share from US$11 per share previously. The enterprise value of the bid is now near US$3 billion. Should WLK’s bid ultimately prove successful, this could possibly facilitate additional industry rationalization of capacity.
European chlor-alkali operating rates in March were 79% of industry capacity, 4.5% below February, and 1.6% below last year. This is a critical period for European Chlor-alkali producers with 23.5% of regional capacity based on mercury cell technology. The European Union has set a deadline of the end of 2017 for these plants to be converted to membrane technology or to be shut down. These conversions are expensive for a marginally profitable industry, and given the lead time to execute such a project, decisions cannot be further delayed. CMR’s survey of plant announcements concludes that 873KTA of capacity will be shuttered (7% of regional capacity) and 1,300KTA of capacity will be converted. Decisions are pending on an additional 580KTA of capacity.
AMERICAS
Sunoco Logistics still considering the Pennsylvania PDH unit
According to Sunoco’s Q1 earning conference call, Sunoco is still evaluating its planned propane dehydrogenation (PDH) unit with a capacity of 650KTAin Marcus Hook, Pennsylvania. This is the scheduled timeframe for a final decision to be made.
Comments: Before 2015, several PDH projects were being considered in North America due to the combination of high commodity prices and shortage in propylene. However, the volatility in global oil prices has made PDH projects less economically feasible, of which many have been put on hold or even canceled. Projects with integration into polypropylene production are more likely to move forward, compared to standalone PDH projects. Formosa eyes 2017 to start up its planned PDH unit in Point Comfort, Texas, with associated PP facilities to be built on the same site. Mid-stream firm Williams plans its PDH unit in Alberta, Canada, and has a propylene supply agreement with Goradia Capital in place to secure the market for output. Kuwait Petroleum recently also proposed PDH/PP complex in Alberta, Canada with a targeted start-up in 2020. Both Canadian projects are expected to benefit from the subsidy program of the Alberta Government once operational.
W.R. Grace to acquire BASF’s polyolefin catalyst assets
BASF has announced the sale of its polyolefin (PO) catalyst business to W.R. Grace, with no term disclosed. The acquisition will include technologies, patents, trademarks, and facilities in USA and Spain. This transaction is expected to close in 3Q 2016 subject to regulatory approval.
Comments: In the past two decades, W.R. Grace has expanded its polyolefin catalyst business through acquisitions and strategic growth, making itself one of the largest suppliers of both PE catalysts and PP catalysts. Early this year, W.R. Grace spun off its construction and packaging segment to be independently operated from the remaining business, which allows each to more focus on its core products. BASF’s polyolefin catalyst segment has its catalysts under the tradename of LYNX®for PE and PP, with experience in developing custom catalysts. The acquisition of BASF’s PO catalyst asset is aligned with W.R. Grace’s strategic focus on core catalysts and materials and can further increase its manufacturing flexibility.
PTTGC eyes 2019 to launch shale gas-fedpetrochemical complex in Ohio
Thailand’s PTT Global Chemical Plc (PTTGC) is scheduled to finalize its petrochemical project in Ohio, USA in early 2017, with expected completion in 2019. The planned petrochemical complex costing US$ 5.7 billion will include a 1,000KTAshale gas-fed cracker, a 700KTA HDPE facility, a 500KTA ethylene glycol plant, and a 100KTA ethylene oxide plant.
Comments: The growth strategies that PTTGC has deployed in recent years are to enhance core upstream business, to integrate into global downstream production, and to develop products toward green and environmental-friendly. The Ohio petrochemical project is part of PTTGC’s strategy to develop downstream production tied to global markets. Apart from the US project, PTTGC also has partnered with Indonesia-based Petarmia and Chinese state-owned Sinochem for a vertically-integrated complex in Indonesia and an engineering plastic (PC and PU) facility in China, respectively. Due to abundant cost-advantaged shale gas, North America has become a popular investment destination for ethylene/polyethylene production. With more than 10 PE projects announced to be built by 2021, North America is anticipated to be oversupplied with polyethylene in foreseeable future. PTTGC is expected to target the majority of production in the USA at export markets in Asia where buyers historically pay premium prices.
INEOS considering expansion in North America
INEOS is evaluating several projects in the United States with the intent to be economically benefited from cheap natural gas resources. The projects under consideration include a new cracker built at the Chocolate Bayou site in Texas and possible capacity expansion of polypropylene and alpha-olefin at that same site. The final investment decision is expected to be made within 12 months.
Comments: Switzerland-based INEOSGroup is one of the fastest-growing chemical companies in the world. In the wake of companies delaying investment decisions because of low crude oil prices and diminishing advantage of abundant and low-cost NGLs in the US, INEOS foresees “a very tight market” for feedstocks, especially ethylene in the beginning of the next decade. The company is pursuing a growth strategy by pondering the expansion of olefins and other acquisitions to strengthen its market position.
Bolivia to build propylene/PP complex by 2021
Bolivia opened a four-month-long international bidding on May 1, 2016, for a US$ 2.2 billion polypropylene complex planned by state-owned YPFB. The project will be located in Yacuiba and is designed to produce 250KTA of polypropylene. The construction is estimated to break ground in 2017 and become operational in 2021.
Comments: Bolivia is a country rich in natural resources and is a major natural gas exporter in Latin America, mainly to Argentina and Brazil. Both Brazil and Argentina import approximately 50% of their domestic consumption of natural gas from Bolivia. However, Brazil with its offshore subsalt field, and Argentina with Vaca Muerta shale are eventually expected to be self-sufficient in natural gas. Facing the expected reduction of exporting gas to Argentina and Brazil in the long term, Bolivia has been in partnership with Peru to build one gas pipeline that will help Bolivia open up an opportunity to export natural gas as LNG to Asian-Pacific. Bolivia is also dedicated to developing the petrochemical industry attempting to add more value to natural gas. Several petrochemical projects, such as the YacuibaC3 complex and Gran Chaco C2 complex, are underway in various stages of completion. With the start-up of these downstream facilities, these downstream products are expected to focus on export markets in other Latin American nations. The long-term investments would help Bolivia add value to its natural resources and be more independent from the international commodity market.
LyondellBasell begins expansionof Texas cracker
LyondellBasell has initiated expansion work on the cracker at its Corpus Christi site in Texas. The capacity addition will boost LBI’sethylene capacity in the USA by approximately 360KTA with expected completion in 3Q 2016.
Comments: LyondellBasell has laid higher emphasis on debottlenecking existing plants for new capacity over building new plants. Before Corpus Christi, the company had completed debottlenecks in La Porte and Channelview in 2014 and 2015 respectively. Debottlenecking gives the company quick additional capacity to leverage the low-cost NGLs advantage at a relatively low investment.
ExxonMobil introduces new metallocene PE grade for shrink films
ExxonMobil has introduced a new metallocene polyethylene grade, EnableTM40-02, aiming at collation shrink film applications. The new grade enables converters to create thinner but stronger bundling films with a faster production cycle, consequently contributing to lower resin and energy consumption.
Comments: The shrink films ensure products such as bottled beverages, and canned goods are tightly secure, thus protecting them throughout the value chain. ExxonMobil’s newEnableTMmPE grade offers a good combination of stiffness, strength, and holding force with an excellent shrink. It also provides downgauging of up to 25%, excellent optics for improved retail shelf appeal, and; tight bonding and uniform shrink for secure packaging. Shrink films are extensively used in packaging and with the added advantage of downgauging, the mPE resin will persuade a lot of converters to use them as it provides a balance of superior properties and lower resin material required for manufacture, which results in cost savings
EUROPE
SIBUR eyes 2020 to launch Zapsibneftekhim complex
Russia’s SIBUR sets to launch a US$ 9.5 billion Zapsibneftekhim project by 2020, aiming at reducing Russia’s reliance on imports. The vertically-integrated complex will produce 1,500KTA of ethylene, 500KTA of propylene, 100KTA of butene, 1,500KTA of polyethylene, and 500KTA of polypropylene.
Comments: Russia recently invested in olefins and derivatives to leverage its abundant supply of oil and associated gas into petrochemical production for both the domestic and export markets. Russian domestic petrochemical producers will also be marginally beneficial relative to imported polyethylene on a cost basis from the decline in Russian currency caused by low oil prices and Western sanctions. Zapsibneftekhim project with modern technologies is part of the strategic move to deeply process by-products of oil and gas extraction in Western Siberia, into polymers as a substitution for imports.
MIDDLE EAST & AFRICA
Saudi Aramco to partner up with SABIC for a petrochemical project
According to Reuters, Saudi Aramco plans to sign a memorandum of understanding (MoU) with SABIC for an oil-to-chemical project. The joint project expected to cost as much as US$ 30 billion is proposed to produce petrochemicals directly from crude oil instead of naphtha. No further details on this project were released.
Comments: In the past few years, Saudi Aramco, which is specialized in oil and refining, has been strategically developed toward downstream production through cooperation with foreign entities, such as Dow for the Sadara project, and Lanxess for Arlanxeo. As Aramco makes its way to downstream business, the conflict with another Saudi Arabian state-controlled firm SABIC is expected to increase in the future. The cooperation between two Saudi Arabian state-controlled giants, Aramco and SABIC, comes with pushing from the government to avoid duplication of downstream projects and eventually create synergies between them. On the flip side, SABIC has readjusted its development strategy toward the specialty market due to falling oil prices erasing cost advantages over non-oil producing nations. With Aramco’s participation, SABIC could have better access to funding, a broader market network, and potentially have Aramco as an investor in future projects.
ASIA PACIFIC
Petronas drops elastomers from the RAPID project
Malaysia’s Petronas has called off the planned elastomer facility under its refinery and petrochemical integrated development (RAPID) project. The cancellation of the elastomer plant is estimated to reduce total capital expenditure by US$ 1.3 billion.
Comments: Petroliam Nasional Berhad (Petronas) planned the refinery and petrochemical integrated development project (RAPID) with an initial investment estimate of US$ 3.9 billion. The elastomer section of the refinery accounted for an estimated US 1.3 billion investment. With an eye toward the elastomer market outlook and project return, Petronas decided to scrap the elastomer plant. The cancellation of the project will result in a capacity reduction of 350KT and help in the overall return on the project. This is not expected to have any impact on the commencement date of the project which is scheduled to start in 2019. The plant which is on schedule to come on stream by mid-2019 is expected to produce 7,700KT of petrochemical products.
China Soft Packaging Group launches PP plant in Fujing
Zhongjing Petrochemical, a petrochemical subsidiary of BOPP producer China Soft Packaging Group, has begun commercial production at the 400KTApolypropylene plant under phase I of the polypropylene project. The two-phase project is designed to build a vertically-integrated C3 complex that includes an LNG terminal, storage tanks for propane and propylene, two 800KTA PDH units, and three polypropylene facilities with a total output of 1,600KTA. The complex is worth US$ 2.3 billion and is scheduled to be entirely completed by 2017.
Comments: China Soft Packaging Group holds a leading position by production volume in the Chinese BOPP film industry. The Chinese BOPP film industry has expanded dramatically in the past few years, now featuring over 80 BOPP manufacturers with approximately 5,000 KT in total capacity. However, overcapacity due to rapid expansion has caused a significant reduction in margins. Margins were in the range of US$60-80/MT before 2012 and now are approximate US$15/MT. Small production lines or producers with no modern equipment installed are facing shutdown or bankruptcy. To keep competitiveness, the choices are to integrate vertically into feedstock production, develop specialty films, or a combination of both. The vertically-integrated C3 complex in Fujing is Soft Packaging Group’s strategic move for the improvement of the cost structure. China Soft Packaging Group has strategically been integrating into feedstock production to secure feedstock availability and to improve production cost structure. In contrast, Hebei Haiwei Group, which is another major BOPP film supplier in China, takes a combined strategy with a focus on developing high-margin products, such as capacitor films and metalized films.
Zhejiang Rongsheng Petrochemical is planning a mega-petrochemical project near Shanghai
China’s private-owned Zhejiang Rongsheng Petrochemical plans to invest US$ 15 billion to set up a petrochemical complex on an island near Shanghai, which will include one 400,000 bpd refinery and one 1,400KTAethylene facility. The project, still subject to approval from the Beijing government, is estimated to become operational in 2020.
Comments: Zhejiang Petrochemical may be able to take advantage of a void in planned projects left by profitability and efficiency concerns regarding both state-owned petrochemical complexes and newer coal-to-olefins/methanol-to-olefins plants. Sinopec and PetroChina, China’s largest state-owned petrochemical companies that combined for over 80% of the country’s ethylene output in 2015, have put on hold or canceled several planned domestic petrochemical complexes choosing to invest in other countries instead. Several of the 13 completed methanol to olefins plants are privately owned, but none have an annual ethylene capacity of over 300 KT. Government approval of new CTO/MTO projects has stalled due to environmental factors and decreased competitiveness of CTO/MTO technology at low oil prices, leaving room for new projects to meet the growing demand for petrochemicals. Rongsheng Holding Group, the parent company, would also benefit from an integrated source of feedstock for its enterprises.
Maoming Petrochemical develops high-value-added PP grades
China’s Maoming Petrochemical has introduced a new polypropylene grade, PPB-MN60-G. The new grade has low VOC content and is equipped with properties of high rigidity and high tenacity, with target segments at automotive applications and PP modification.
Comments: Maoming Petrochemical, a subsidiary of Sinopec located in Guangdong province, was established in 1956 due to China’s 1st Five Year Plan for the exploring and refining of shale oil and later transformed into the vertically-integrated petrochemical base in 1996 that serves the Southern China area. In the past five years, Sinopec Maoming has had its R&D focus tied very closely to the nation’s goal to develop downstream products toward high value-addition. The company has “Ten Dragons”, which is an R&D program focused on products with high technical thresholds but high market demand, in place to boost the company’s growth. The development of PPB-MN60-G is a result of the “Ten Dragon” program. Currently, imported polypropylene accounts for approximately 40% of total PP consumption, which primarily is specialty grades. With China’s PP commodity segment experiencing oversupply, it is anticipated to see more local PP producers take similar courses of action for better profitability.
SHALE GAS DEVELOPMENT
Poland’s PGNiG tentatively to stop shale gas exploration
Poland’s state-owned PGNiGplans to stop exploration of shale gas in Poland if the simulation of a shale well in Northern Poland fails to yield promising results in early June.
Comments: With the largest shale gas reserve in Europe, Poland has long hoped to duplicate the success of shale gas in the US with many of the world energy giants involved. However, interest has faded due to the combination of poor results of test drilling, uncertain governmental regulations, and pressure from plummeting crude oil prices. ExxonMobil, Marathon Oil, Chevron, ConocoPhillips, Total, and ENI have withdrawn from the Polish shale gas industry, leaving only Polish state own firm PGNiG and Polish refiner PKNOrlen still in the field. The Poland government has been considering an energy sector merger, which could combine PGNiG with Lotos LTSP and PKN Orlen. The potential energy sector reform could create an energy giant with a market value of US$15 billion. With the country’s energy strategy to be more independent from Russia, the Polish shale gas industry is expected to continue more cost-effectively. Poland also has signed a cooperation agreement with China to exchange experience of exploring shale gas on complicated geology and handling restrictive environmental regulations.
COAL-TO-CHEMICAL
Shenwu Corp. to set up a coal-based PE plant in China
Beijing-based Shenwu Corp. has announced its plan to build a polyethylene facility in Hubei province using its proprietary coal-to-acetylene technology. The project with an estimated total expenditure of US$ 3.08 billion is proposed to produce 800KTA of polyethylene, 530 million standard cubic meters of LNG, 140KTA of coal tar, and some other chemicals. The project is currently planning stage with the expected start-up remaining undisclosed.
Comments: The crude oil plunge since 2014 has made the Chinese coal-to-coal industry much less appealing than it was before, which consequently slows the rapid development of the 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 the 13th Five-Year Plan, Water Pollution Action Plan, and New Environmental Protection Law, China plans to reform the coal-to-chemical industry toward being cleaner, more energy efficient, and more value-added on products. Shenwu’s coal-to-acetylene technology emphasizes better energy efficiency as well as less emission and pollutant than conventional processes. Shenwu Corp. proposes this demonstration project with support from the local government. The combination acetylene-route coal process with the production of value-added downstream products such as PE is tied to the country’s revised development strategies in the coal-to-chemical industry. There is a talk that the Chinese Government has enacted Tax Preferences that will aspire coal-to-chemical producers for further vertical integration. Shenwu Corp’s coal-to-PE project could potentially benefit from Tax Preference.
BIOBASED
Toyota, Zeon, and Sumitomo develop biobased synthetic rubber for under-the-hood applications
Comments: Vacuum sensing hoses are used in engine intake system components and require a high level of oil and heat resistance. Zeon, a collaborator on the project, offers a line of epichlorohydrin polymers modified with ethylene oxide and allyl glycidyl ether for a variety of fuel oil-resistant applications including automotive gaskets, hoses, and diaphragms. Biohydrin rubber is produced by compounding some plant-derived material with petroleum-derived polymers. Toyota plans to further expand the use of biohydrin in its vehicles’ brake and fuel-line hoses as part of its Environmental Challenge 2050 initiative. Toyota Motor has announced a plan to start using biohydrin rubber as a substitute for petroleum-based material (epichlorohydrin) in its engine and drive system hoses. This development of bio-based synthetic rubber is a result of collaboration with Zeon and Sumitomo. The usage of biohydrin rubber is expected to be rolled out to all Toyota vehicles manufactured in Japan by the end of this year.