Propylene         

*Millions of pounds per year for chemical uses: E, from ethylene units - total 45% US capacity; R, from refinery operations - total 55% US capacity; c, chemical grade; p, polymer grade; r, refinery grade.

In 1997 USX Marathon and Ashland created the JV, Marathon Ashland. Equistar Chemicals is the JV that Lyondell Petrochemicals and Millennium Chemicals formed that same year.

In 1998, Occidental Chemical merged its propylene business into Equistar, and Amoco merged with British Petroleum to become BP Amoco. Shell and Texaco formed the JV Equilon Enterprises, and Texaco, Shell and Saudi Aramco created a JV named Motiva Enterprises. Also in 1998, BASF and FINA Petrochemicals announced a JV project in Port Arthur, TX, to be completed later this year with a propylene capacity of 1.9 billion pounds.

Exxon and Mobil merged in 1999 to form a new entity, Exxon Mobil. Arco sold its subsidiary, Union Texas Petrochemicals to Williams Companies, who now co-owns the propylene plant in Geismar, LA with BASF and GE.

Also in 1999 Exxon Mobile and Enterprise Products Partners formed a JV that will own and operate a new propylene concentration unit (1.5 billion pounds, chemical grade) in Port Allen, LA. Exxon and other suppliers will provide the joint venture with refinery grade propylene feedstock, beginning mid-2000.

Profile last published 12/25/95; this revision 1/31/00.

DEMAND
1998: 28.2 billion pounds; 1999: 29.8 billion pounds; 2003: 35.3 billion pounds forecasted. Includes imports (about 1% of total) less exports (about 3% of total).

GROWTH
Historical (1994-1999): 5.5% per year; future: 4.3% per year through 2003.

PRICE
Historical (1994-1999): High, $0.225 per pound, polymer grade, del. Gulf Coast; $0.21 per pound, chemical grade, same basis; low, $0.145 per pound, polymer grade, same basis; $0.13 per pound, chemical grade, same basis. Current: $0.195 per pound, polymer grade, same basis; $0.18 per pound, chemical grade, same basis.

USES
Polypropylene, 39%; acrylonitrile, 14%; propylene oxide, 11%; cumene, 10%; oxo alcohols, 8%; isopropanol, 7%; oligomers, 5%; acrylic acid, 3%; miscellaneous, 3%.

STRENGTH
The major propylene derivatives are enjoying healthy markets. Polypropylene demand remains solid, fueled in part by substitution for HDPE (high density polyethylene) and ABS (acrylonitrile-butadiene-styrene) resins. Acrylonitrile is doing well and has a strong export market. Propylene oxide's growth has been above GDP this past year and cumene remains steady.

WEAKNESS
Between 1999 and 2001, U.S. propylene capacity will grow by an average of 2.4 billion pounds per year, but demand is expected to expand only by 1.3 billion pounds per year. Analysts suggest the propylene market will not strengthen appreciably until 2003, when polymer-grade prices could exceed $0.20 per pound.

OUTLOOK
Refiners heavily influence propylene pricing because they can move in and out of the merchant market, depending on the value of propylene for gasoline alkylation. The crude oil price hit a nine year high this month. If oil prices increase further, the alkylation value of propylene will likewise increase and refineries will pull propylene out of the chemical market, leading to shorter supply and higher prices. Supply uncertainty has prompted some propylene derivative producers to rethink their long-term strategy. One major shift is the formation of partnerships between refiners and chemical makers, under which FCC propylene supply is upgraded in a splitter and dedicated to derivatives production - mainly polypropylene. Demand for propylene could also increase because of reduced methyl tert-butyl ether (MTBE) use, and a ban in California. Refiners may have to use alkylate as an alternative to MTBE for boosting octane value.