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Europe’s Import Dependence of Propylene and Its Oversupply in North America and China Will Bridge the Gap in Polypropylene Production.

Published By : IndustryARC | Published On : 2016-02-24
There is no denying the fact that the petrochemical industry is in a period of uncertainty with respect to olefin prices. The oil prices have tumbled, and trade flow patterns have changed. The exponential drift in the oil market for the coming year of 2016 will be driven mainly by fundamentals and by the supply side, in particular. Some of the prominent drivers for the plunge in oil prices are: a slowing global economy, increased production in North America, disturbing long fixed supply balances, reluctance of the (OPEC) Organization of the Petroleum Exporting Countries to lose market share, and significant problems in the oil dependent economies.

The Middle East countries are, by far the largest exporters of polyolefins, while on the contrary, China continues to reduce its dependence on imported resins as it is moving towards alternative methods. The supply and demand equation picture of these olefins is changing. For instance, China is investing in coal gasification and methanol to olefins technologies. Going forward, China is anticipated to be self-sufficient in the production of propylene. According to various industry experts, the global propylene production is estimated to grow manifold in the upcoming years, prompting a radical shift in the supply chain. 

Traditionally propylene was produced as a by-product of ethane steam crackers or from oil refineries. But these sources couldn’t keep up with the demand of propylene, required in high end industries. This is the reason why, there was a shift from ethane steam crackers to shale gas based propylene feedstocks. As a result of these shortages across the world, substantial investments have been pouring into the industry to boost the availability of alternative technologies including methanol-to-olefins, methanol-to-propylene and propane dehydrogenation (PDH). As a result of this shift, there has been a threat of oversupply in China and North America as these investments in MTO, MTP, and PDH technologies will permanently alter the paradigm of propylene’s global supply and market pricing dynamics, over the next 5 years. China, which was once the largest importer of propylene and propylene derivatives, has now found a long term way for its self-sufficiency, while investing in PDH units across the country. Same is the case with North America wherein, there is wide adoption of PDH units across the continent, which will eventually lead to ample supply of propylene and its derivatives.

While North America and China are addressing their propylene shortfalls with alternative technologies and feedstocks, Europe, is anticipated to solve imbalances to its propylene supply with additional imports from the nations with oversupply of the product. Currently, there are two PDH units in Europe, but all indications are that new PDH and MTO-MTP investments are not viable options. Hence, the only option left for meeting the demand is increasing imports, which will eventually bridge the gap between propylene and polypropylene. 

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