The multi-era of propylene

Thread Content

A tripartite struggle for dominance in the world; heroes sought along the arduous paths. Acrylic is one of the most important petrochemical products, boasting not only sophisticated production processes but also a diverse range of downstream industrial applications. In recent years, with the development of downstream products such as polypropylene, propylene oxide, and butyl octanol, the demand for propylene – as the main raw material for these bulk chemicals – has also been increasing. With the rapid advancement of new technologies, the propylene market has now seen a tripartite competition. In recent years, various research institutions have also increased their efforts in studying propylene production processes. In August 2010, China Shenhua’s 600,000 tons per year coal-to-olefins project in Baotou was officially put into operation. In October 2013, Tianjin Bohai Petrochemical’s 600,000 tons per year propane dehydrogenation project also began operations, marking the transition from concept to reality for coal-based methanol-to-olefins projects and propane dehydrogenation projects in China. Together with the existing production processes such as steam cracking, catalytic cracking, and olefin conversion, propylene has officially entered an era of diversified feedstocks. The advantage of low costs and good economic returns quickly attracted a large number of investors. Within 5 years, as many as 20 coal-based methanol-to-olefins plants have come online, while the number of propane dehydrogenation plants has increased to 6; these facilities generate production capacities of 5.21 million tons per year and 3.45 million tons per year for propylene, respectively. In 2013, the capacity for producing olefins from coal-based methanol and propylene via propylene dehydrogenation accounted for 9.35% and 2.86% of the total propylene production capacity respectively. With the large-scale deployment of new production processes, these proportions have now risen to 19.06% and 12.62%, resulting in a tripartite competition in the propylene market. Supply saturation disrupted the balance, leading to a disastrous situation for propylene. In order to gain a stronger foothold in the market, newly launched production projects use full capacity for manufacturing. Coal-to-olefins projects are mostly located in the central and western regions, and their products usually have corresponding downstream applications, so the direct impact on propylene is relatively small. Meanwhile, the methanol-to-olefins and propane dehydrogenation projects located near the eastern coast produce large amounts of propylene for trade. A wider range of raw material sources, a business strategy focused on volume, and an expansion pace that outpaces development in downstream industries have all contributed to the propylene market shifting from a supply shortage to a state of saturation. The influx of supply from external markets has further increased the regional supply pressure in the eastern coastal markets. Taking the market in September as an example, downstream demand was weak, leading to purchases of propylene at reduced prices. Local refiners initially intend to gradually reduce their inventory levels, preferring to sell at low prices. On the one hand, a large volume of cheap goods from the Northeast and East China flowed into Shandong, a region with high demand; on the other hand, accidents such as the explosion in Tianjin triggered safety alarms. Ports across the country saw all cargo ships heading to Dongying Port, the only port where they could dock at that time, in order to unload their cargo there. The regional balance in the propylene market was instantly disrupted, and market prices suffered a severe decline, falling from 6,500 yuan per ton to 3,800 yuan per ton, a decrease of 41.54%. At that time, the price of methanol was between 1,800–1,900 yuan per ton, while the price of imported propane fluctuated in the range of 380–420 dollars per ton. Based on these figures, the costs of producing propylene from methanol and propylene from propane dehydrogenation were 6,400–6,750 yuan per ton and 4,850–5,250 yuan per ton respectively, both indicating significant losses. Despite the challenges along the tough path, heroes strive bravely to seek truth. However, while such a situation has raised concerns within the industry, it has not prompted any alarm; the workload related to these projects remains high. No matter how sluggish the market conditions may be, factories continue to supply goods on a steady basis. We believe that price wars in the propylene market will remain the norm for a long time, and the forced shutdowns or production cuts of some companies will merely be temporary measures during this period. Theoretically, one way to address this situation is to regulate the operational practices of enterprises. However, Shandong Local Refining, the leader in propylene production, is constrained by its limited inventory capacity and often has to adjust its operations according to market conditions. This has led many companies, especially emerging ones, to seek integrated development across the entire supply chain. To be honest, this is a pretty good choice. Large enterprises make full use of the resources at their disposal to build complete industrial chains, in order to achieve maximum efficiency – which is also in line with the general trend of corporate development. However, every product market has a saturation point; when a product market is already saturated or approaching saturation, it is clearly inappropriate to act solely based on the company’s own plans, without considering the capacity of the entire market. And there are only two things we need to do: first, strengthen research in the industry to enhance the foresight of enterprises, including being proactive in the development of new technologies and in resource accumulation, so as to always stay at the forefront of the industry. Second, one must be more cautious and rational when facing market fluctuations, especially sharp rises and falls. In the coming years, coal-based methanol-to-olefins projects such as Daze Chemical, Qinghai Salt Lake, China Coal Mengda, Shenhua Yulin, and Zhongtian Hechuang, as well as propane dehydrogenation projects like Hebei Haiwei, China Soft Pack, and Ningbo Fuki Petrochemical, will begin operations one after another, which may lead to a risk of overcapacity in the propylene market. Of course, China’s demand for propylene will continue to grow in the future, and it will also take time to absorb the new production capacity. There are also many uncertainties in this process, such as market fluctuations, technological changes, and policy adjustments. While it increases the difficulty of navigating a market characterized by tripartite competition, it also offers many professionals an opportunity for change.