Propylene Oxide Shortage Is Sure to Last

By Zhang Yue, China National Chemical Information Centre

China’s propylene oxide (PO) capacity has increased constantly in recent years, but the supply is never sufficient – recently, 20-25% of domestic demand is met by imports. Quite a few new plants started production in 2014, but operating rates were not high. The supply gap was around 456 kt, 19% of demand.

Diversified production processes

The three main production processes for propylene oxide are the chlorohydrination process, the co-oxidation process and the direct oxidation (HPPO) process. The total PO capacity in China in 2014 was 2 720 kt/a. By process, 1 740 kt/a (64%) was chlorohydrination, 580 kt/a (21%) was co-oxidation, and 400 kt/a (15%) was HPPO.
For now, the major process for producing propylene oxide in China is the chlorohydrination process, but the proportion of the capacity using the process is gradually becoming smaller.  110 kt/a chlorohydrination units were shut down in 2013 for environmental protection, etc. They included 40 kt/a unit in Shenyang Jinbilan Chemical Industrial Co., Ltd., a 50 kt/a unit of Shandong Eastar Holdings Group Co., Ltd. and a 20 kt/a unit of Hebei Shijiazhuang Huichuan Chemical Co., Ltd. One more unit, a 50 kt/a PO unit in Shandong Yongda Chemical Co., Ltd. is to close in 2015.
China’s principal PO units using the co-oxidation process are the 290 kt/a unit of CNOOC and Shell Petrochemical Co., Ltd. and the 285 kt/a unit of Ningbo ZRCC Lyondell Chemical Co., Ltd.
China’s first PO unit to use the HPPO process, a 300 kt/a propylene oxide unit in Jishen Chemical Industrial Co., Ltd., started production in February 2014. It uses technology from Evonik Uhde of Germany. A 100 kt/a PO unit using the HPPO process was completed in Sinopec Changling Petrochemical Co., Ltd. in December 2014. The technology was developed in house.
This year, 360 kt/a of new PO capacity is expected to start up in China, all employing the co-oxidation (propylene oxide/tert-butyl alcohol) process. This includes the first-phase 120 kt/a capacity of Yantai Wanhua Polyurethane Co., Ltd. and 240 kt/a capacity of Nanjing Jinling Huntsman New Material Co., Ltd.


Table 1    Major propylene oxide producers in China, 2014

Producer    Region    Capacity (kt/a)    Production process
Jishen Chemical Industrial Co., Ltd.    Northeast China    300    HPPO
CNOOC and Shell Petrochemical Co., Ltd.    South China    290    Co-oxidation
Ningbo ZRCC Lyondell Chemical Co., Ltd.     East China    285    Co-oxidation
Befar Group Co., Ltd.    East China    280    Chlorohydrination
Shandong Wudi Xinyue Chemical Co., Ltd.    East China    200    Chlorohydrination
Shandong Jinling Chemical Co., Ltd.    East China    160    Chlorohydrination
Tianjin Dagu Fine Chemical Co., Ltd.    North China    150    Chlorohydrination
Fangda Jinhua Chemical Technology Co., Ltd.    Northeast China    120    Chlorohydrination
Jiangsu Zhongshan Chemical Co., Ltd.    East China    100    Chlorohydrination
Sinopec Changling Petrochemical Co., Ltd.    South China    100    HPPO
Others        730    Chlorohydrination
Total        2 715    



Large scale of producers

There were over 20 PO producers in China in 2014. Two of them use the HPPO process, two use the co-oxidation process, and the others use the chlorohydrination process. (See Table 1 for details). Due to constraints inherent in the chlorohydrination process, the scale of PO units in China is typically quite small (less than 100 kt/a). The scale of PO units using the co-oxidation process and the HPPO process is however 240-300 kt/a. With the adoption of advanced production processes (the co-oxidation process and the HPPO process), new units tend to be larger.

High import volume

China’s PO imports increased by leaps and bounds during 2009-2014. (See Figure 1 for details). The volume was 250 kt in 2009 and increased sharply to an all-time high 515 kt in 2012. The import volume was 456 kt in 2014, an increase of 2.5% over the previous year.
Major sources of imported PO in 2014 included Thailand, Saudi Arabia and Singapore, which together provided 84% of the total. Major suppliers were SCG-Dow of Thailand, Petro Rabigh of Saudi Arabia and Shell of Singapore.

Steady rise of prices

The average price of PO was RMB12 437/t in 2014, an increase of 6.6% over the previous year. In the first quarter of 2014, with the completion and imminent productivity of a 300 kt/a HPPO-process unit, PO prices fell sharply. In the second quarter, the operating rate of the new unit was unstable, but still, PO prices floated at a low level. In the third quarter, prices rose strongly because of much overhauling, CNOOC Shell reducing its load by half, the domestic supply flagging, imports also falling off, and demand rising a bit. In the fourth quarter, Singapore Shell completed the overhaul of its PO unit, imported resources picked up, and the prices of raw material propylene started to come down due to falling crude oil prices, so PO prices declined.
In the first half of 2015, PO prices first rose and then slid. Figure 2 shows the PO price trend from January 2013 to May 2015.

Ongoing PO shortage

Co-oxidation PO units planned for construction here include only a 240 kt/a unit of Yantai Wanhua Polyurethane Co., Ltd. and a 240 kt/a unit of Nanjing Jinling Huntsman New Material Co., Ltd. Also, Fujian Meizhouwan Chlor-Alkali Industry Co., Ltd. and Sinopec Shanghai Gaoqiao Company each intend to construct a 300 kt/a HPPO-process unit. If all of these units are put on stream, PO capacity will reach 3 750 kt/a in 2020.
Propylene oxide is mainly used in the production of polyether polyol. In the near future, China will put on stream around 1 380 kt/a of new capacity to make polyether polyol. If those units operated at 70%, the demand for propylene oxide will increase by around 960 kt. Demand in other PO application sectors will also increase steadily. Propylene oxide demand in China is likely to be around 3 560 kt in 2020. If all the demand is to be satisfied by domestic production, the average PO operating rate will have to be 95% in 2020. Due to the low operating rate of chlorohydrination units, however, such high operating rates can hardly be reached. So the domestic PO supply will still be quite tight in 2020.