Views:0 Author:Site Editor Publish Time: 2019-07-04 Origin:Site
Source: China Chemical Industry News July 04, 2019
The outlook for the US propylene market is not optimistic. Since the beginning of this year, U.S. propylene inventories have been at or near record levels, and in the second half of the year, at the propylene supply side, refinery operating rates have remained strong, cracker capacity has increased, and propylene supply has been strong. On the demand side, affected by the continued escalation of US-China trade frictions and the slowdown in global economic growth, the growth in propylene demand is slowing. Affected by this, the supply of propylene in the United States will exceed the downstream demand for propylene, and the market supply will be further surplus, causing the price of propylene in the United States to fall.
Market participants predict that in the second half of 2019, US propylene production will be boosted by two main factors: the refinery operating rate remains high and new crackers are put into production.
The operating rate of US refineries will remain high in the second half of the year, especially when diesel demand is expected to be stronger. As the International Maritime Organization (IMO) has previously stipulated new regulations for low-sulfur content of marine fuels, the shipping industry is required to switch to marine fuels with a sulfur content far below the current allowable level, and will be implemented in 2020. Prepare for this. This has increased the demand for low-sulfur diesel in the short term, and has also boosted US refinery operating rates.
On the other hand, the capacity of new crackers in the United States is being released quickly. In 2019, five new cracking units in the United States began production, namely five new ethane cracking units for Indorama, Lotte/Westlake Chemical (LACC), Shinco, Sasol and Formosa. Although the cracker with ethane as a single raw material has lower propylene production than the old flexible feed cracker, the propylene production from the cracker will increase to the already saturated propylene market.
At present, the new cracking units of Indorama and LACC have been put into production, but they have encountered difficulties in producing products that meet specifications. The device is either not running or not fully running. Xinke's new cracking unit is likely to be the next cracking unit put into production in the United States this year. The new cracking units of Sasol and Formosa will also be put into production later this year. The supply of propylene has become stronger.
While the supply side remained more robust, the demand side of the propylene market fell into weakness. Demand for the petrochemical industry is generally weak in 2019 due to the bleak economic outlook and the generally strong sectors such as automobiles and construction that are in a downturn. Due to the escalating trade tensions between the United States and China and the slowdown in global economic growth, the polypropylene (PP) market growth was lower than expected this year, and PP is the largest downstream market for propylene.
Kevin Swift, chief economist of the American Chemical Industry Council (ACC), said that the global economy is facing multiple unfavorable factors, which will lead to slower economic growth, and then lead to the propylene market. ACC predicts that, driven by the growth of business investment, the US GDP will grow by 2.5% in 2019. However, this figure is lower than 2.9% in 2018, and the growth rate in 2020 is expected to continue to slow. For the automotive industry, ACC predicts that sales of light vehicles in the United States will fall from 17.2 million in 2018 to 16.8 million in 2019 and 16.6 million in 2020.
In fact, US spot propylene prices have fallen sharply since they reached a high in May. Market participants predict that as supply exceeds demand, the price of propylene in the United States will remain flat or even decline in the near future, even though Ineos’ Green Lake acrylonitrile (ACN) unit will resume production in July to temporarily improve demand. Market participants said that only when consumption significantly exceeds production can the US propylene market be restored to a more balanced state, which is unlikely to happen under the existing circumstances.