Propylene Oxide  

*Millions of pounds of propylene oxide (PO) per year. Commercial production is from propylene and chlorine in a chlorohydrin process (Dow, Freeport and Plaquemine), or from peroxidation of propylene and another petrochemical reactant that results in PO plus an additional co-product. At Lyondell’s Channelview plant, styrene is co-produced with PO using ethylbenzene. Lyondell’s Bayport plant produces PO and tert-butyl alcohol using isobutane. At Port Neches, Huntsman employs a similar process but produces methyl t-butyl ether (MTBE) instead, as the co-product.

Lyondell Chemical purchased the ARCO Chemical Company in 1998, acquiring the PO plants in Bayport and Channelview, Tex.

Since 1998, Huntsman has added approximately 125 million pounds of capacity at Port Neches, through debottlenecking.

Last year, Dow has expanded its PO capacities through incremental expansions of 100 million pounds at its plant in Freeport, Tex., and 60 million pounds at its site in Plaquemine, La.

Also last year, Bayer acquired Lyondell’s polyols business, and with it, a 36 percent equity interest in Lyondell’s PO operations. The deal gives Bayer the right to purchase 1,600 million pounds per year of PO. As part of its agreement with Bayer, Lyondell will build a joint-venture PO and styrene monomer plant in Rotterdam.

In March of this year, Dow announced that it is delaying construction of its new PO (and styrene monomer) plant, originally scheduled for completion in 2004 on the U.S. Gulf Coast because of a shift in the supply-demand balance. The new plant is sized for a capacity of 550 million pounds of propylene oxide.

Profile last published 7/13/98; this revision 8/27/01.

DEMAND
1999: 3,620 million pounds; 2000: 3,690 million pounds; 2004: 4,070 million pounds, projected. Demand equals production plus imports (1999: negligible; 2000: negligible) less exports (1999: 649 million pounds; 2000: 645 million pounds).

GROWTH
Historical (1995 - 2000): 1.7 percent per year; future: 2.5 percent per year through 2004. Growth from 1995 to 2000 appears depressed because of the relatively high base year, 1995, in which demand was 3,400 million pounds. Growth from 1990 to 2000 was 3.7 percent per year.

PRICE
Historical (1995 - 2000): High, $0.64 per pound, list, tanks, f.o.b. works, frt. equald.; low, $0.595, same basis. Current: $0.64, same basis. Contract prices for large consumers are slightly less.

USES
Urethane polyether polyols, 58 percent (flexible foams, 51 percent; rigid foams, 6 percent; non-foam use, 1 percent); propylene glycols, 22 percent; P-series glycol ethers, 5.5 percent; di- and tripropylene glycols, 3.5 percent; miscellaneous, including polyalkylene glycols, allyl alcohol and isopropanolamines, 11 percent.

STRENGTH
The supply-demand balance has been good during the past few years, and remains so, despite the downturn in the economy. Dow’s decision to postpone their new PO production unit until the economy rebounds will help maintain market stability for the next couple of years.

WEAKNESS
Demand for polyurethanes, the biggest market for PO and its derivatives, is driven by the automotive, housing and construction markets. All of these sectors have been adversely affected by the cooled U.S. economy. PO plants in the U.S. are now running at about 85 percent capacity, down from 87 percent last year and 90 percent in 1999, reflecting the current economic weakness. In addition, high feedstock and utility costs are squeezing the margins of the producers.

OUTLOOK
During the past 10 years, propylene oxide grew at a nearly 4 percent annual rate. PO's growth should moderate to about 3 percent in the present decade because most of its applications are maturing. Growth across the decade will also be statistically slower because the market started at a peak last year and went into a recession this year, reflecting the U.S. economy. A rebound, however, is anticipated in 2002. Derivative inventories will be consumed by then and it is likely that the economy will be turning upward with continued interest cuts by the federal government. Scheduled turnarounds in Europe and Asia should keep the market well balanced to tight in 2001. The price of PO has also been stable despite rising feedstock and energy costs. The last increase was in January 1996, but there could be an adjustment later this year. Projected growth through 2004 is 2.5 percent.