Thursday, 18 September 2014

How will US shale gas alter the global propylene market? - 18/09/2014

How will US shale gas alter the global propylene market?

Using our integrated market analysis of supply, demand and trade, we forecast shifting industry dynamics to 2030
Propylene has traditionally been produced as a co-product from naphtha steam cracking, the dominant method of ethylene production.
However in 2010, the US shale gas boom sparked an increase in ethane cracking – a cost-advantage technology which produces minimal propylene yield, triggering the loss of 3.5 million tons of production from the US market.
Yet despite current supply shortages, we forecast that the world's propylene capacity will increase from around 109 million tons today to 165 million tons by 2030.
This is due to the rush towards new 'on-purpose' production technologies – using feedstocks such as propane, natural gas and coal – which will help to close the supply gap and also significantly alter the market.
Download Global propylene long-term outlook 2H 2014
*Click the image to download the charts (906K)
In North America, where shale has also lowered the cost of propane used as a feedstock, we anticipate the rapid adoption of propane dehydrogenation (PDH) technology.
This method is also part of China's propylene self-sufficiency strategy, with several units expected to start production by the end of this year and more than a dozen additional plants currently under consideration.
China is also investing in methanol-to-olefins/propylene (MTO/MTP) technologies, which will utilise the country's vast coal reserves. The first MTO in China was started up by Baotou Shenhua Coal Chemical in 2010, twelve more units will be running by the end of 2014, and many more are under consideration.
Between 2005 and 2030, the market share of PDH and MTO/MTP sourced propylene will increase to around 45% of China's total capacity, pushing the country toward full self-sufficiency and negatively impacting export-oriented producers in South Korea, Saudi Arabia, Taiwan, Singapore and India.
As traditional sources of propylene become increasingly supplemented by on-purpose production, it's clear that the industry will become more exposed to feedstock pricing changes and technological risks associated with these new supply methods.

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