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This report focuses on the supply/demand picture for propylene in chemical uses even though substantial use of propylene occurs on-site in refineries as a component of fuels. The report includes brief discussions of propylene’s fuel markets in each regional consumption section and provides propylene consumption forecasts to the year 2012.
Consumption of propylene worldwide is expected to grow at a healthy average annual rate over the five-year period from 2007 to 2012. Refurbishment and new construction of splitters in refineries will provide 15–20% of propylene capacity growth. However, the majority of new capacity will come from ethylene coproduct streams resulting from the expansion of existing ethylene plants and from grassroots mixed feed and naphtha-fed ethylene units that will start up worldwide during 2007–2012. A harbinger of future sourcing trends is the nearly 25% of capacity growth over the next five years that will come from “on-purpose” ethylene/butylene metathesis, propane dehydrogenation facilities and other sources.
The supply of propylene remains highly dependent on the health of the ethylene industry as well as on refinery plant economics. Propylene availability from ethylene plants is related to the supply/demand balance for ethylene, its feedstock slate and cracker operating conditions. Propylene availability from refineries is dictated by the strength of the economic incentive to recover and sell propylene to chemical markets or to consume it internally for gasoline alkylate. In order for refiners to install equipment to recover propylene for chemical markets, the projected propylene value must exceed alternative internal alkylation values by the cost of installing and operating a propane/propylene splitter plus a reasonable return on investment. The rapid increase of oil prices to well over $100 per barrel has clouded the long-term view of this economic trip wire in that values of alkylate in gasoline have risen to new and unprecedented heights.
The following pie chart shows world consumption of propylene in chemical applications:
Most of the world’s propylene production and consumption is concentrated in North America and Western Europe, representing 46% of the total. Demand in Asia and Oceania (including Japan and China) represents about 41% of total world consumption. China has passed Japan as Asia’s largest user, and now is second only to the United States, with 15% of the world total in 2007. Demand in particular in China and also the Middle East has shown dramatic growth in the last decade and will continue to outpace growth in the established petrochemical centers during the next five years. Growth in propylene has been and will continue to be influenced primarily by the requirements of the polypropylene industry. World propylene consumption will increase at a healthy rate during 2007–2012. The highest growth in consumption is expected in the Middle East and Africa at double-digit rates, followed by China with very high growth rates expected. The established consuming regions of North America, Western Europe and Japan will be hard pressed to show any growth as their downstream consumption slows and/or moves to other regions.
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