18:43 PM | February 24, 2014 | Jeffrey Plotkin
This column, based on IHS Chemical’s newly developed three-day training course, Understanding the Global Petrochemical Industry, is the first in a series of monthly articles aimed at breaking down the complexity of the global petrochemical industry into easily understood terms. In particular, I will be focusing on how hot topics in industry are combining with industry fundamentals to reshape the competitive landscape with respect to technology, markets, and economics. Industry newcomers as well as experienced professionals needing a refresher or changing roles will find these articles to be both informative and insightful.
The petrochemical industry is composed of a dizzying array of moving parts. The components include feedstocks, basic chemicals, intermediates, polymers, plastics, fibers, elastomers, specialty chemicals, and formulations—each with a specific set of regional and interregional logistic issues, process technologies, cost structures, integration benefits, price-setting mechanisms, end-use demand drivers, producers, and customers. And, these issues are also often intertwined, sometimes in obvious ways and sometimes in not-so-obvious ways. How can we make sense of all this? How can we unravel these deep interconnections so we can make informed decisions?
The methodology we use in our training course is the Seven Basic Building Blocks model. We can build the entire petrochemical industry based on seven materials (diagram): synthesis gas (syngas); the three olefins—ethylene, propylene, and C4 olefins; and the three aromatics—benzene, toluene, and the xylenes. From these seven, we can manufacture all of the intermediates, plastics, fibers, and elastomers we use in everyday life. The foundation upon which these building blocks is various key feedstocks, including natural gas, natural gas liquids (NGLs), petroleum fractions, coal, and even renewables.
Global demand for all seven building blocks is shown below (chart). The two key chemical uses for syngas, which is composed of a physical mixture of carbon monoxide and hydrogen, are to produce ammonia—mostly for fertilizers but also for chemicals—and methanol. While ammonia, driven by the fertilizer markets, is growing at near-GDP rates, methanol is growing surprisingly rapidly. Fuel uses, such as production of dimethyl ether, biodiesel, and direct gasoline blending, are driving this speedy growth. A new approach for olefins production, methanol-to-olefins (MTO), is also a significant new demand driver for methanol.
Demand for ethylene is dominated by four commoditized, mature areas. These include three types of polyethylene (PE), low-density PE, high-density PE, and linear low-density PE (LLDPE); polyvinyl chloride and precursors ethylene dicloride and vinyl chloride monomer; ethylene oxide and its key derivative monoethylene glycol; and styrene used for a variety of products, including the polystyrene, acrylonitrile butadiene styrene (ABS) high-impact plastic, styrene butadiene rubber (SBR), and unsaturated polyester resin. Vinyl acetate monomer and linear alpha olefins are much smaller, more specialized businesses.
Propylene, while not as large in demand volume as ethylene, is the starting point for a wider range of products than those made from ethylene. However, two-thirds of the world’s propylene goes into one very large business, polypropylene (PP). Demand growth for PP has been relatively high over the last 15 years owing to its good properties delivered at a reasonable price.
The other propylene derivatives are much smaller and more specialized. The cumene value chain starts with phenol and acetone, which, when combined, give bisphenol A (BPA). BPA is the key building block for producing polycarbonate and epoxy resins. Phenol is also used to make phenolic resins and nylon intermediates. Besides BPA, acetone is used as a solvent and as an intermediate for producing methyl methacrylate (MMA) and a specialty solvent, methyl isobutyl ketone.
Other uses for propylene include propylene oxide for making polyol ethers for the PU business and propylene glycol, acrylic acid for making superabsorbent polymers for diapers and acrylates for the coatings industry, and acrylonitrile for fiber production, ABS plastic, and acrylamide. The alcohols, n-butanol and 2-ethylhexyl alcohol, are also propylene derivatives.
The C4 olefin with the largest demand is 1,3-butadiene. The two double bonds of butadiene allow us to mimic natural rubber and make synthetic elastomers, with the largest-volume elastomers being polybutadiene and SBR. Tire manufacture drives demand for these synthetic rubbers.
Other, smaller uses for butadiene include other elastomers: styrene-butadiene latex and nitrile rubber. Nonelastomeric uses include ABS and hexamethylenediamine for nylon production. The chief uses for isobutylene are butyl rubber, highly reactive polyisobutene, and MMA. The main use for butene-1 is as comonomer for LLDPE, while butene-2 is used to make methyl ethyl ketone, an oxygenated solvent.
About half of all benzene is used to make styrene while another 20% is used to make cumene. Benzene is also used to make cyclohexane, the precursor for adipic acid and caprolactam, both used for nylon manufacture. Methylene diphenyl diisocyanate, a key monomer for PU production, is another important benzene derivative. Most toluene is converted to benzene, xylenes, or both but also finds use in its own right as a solvent and as an intermediate for making toluene diisocyanate for the PU business. Para-xylene (p-xylene) is the most important of all the xylenes. Virtually all, 98%, of p-xylene is converted to purified terephthalic, which, in turn, is converted mostly to polyester, either for fiber, bottle, or film use.
Ensuing articles in this series will take detailed looks at each key component of the petrochemical industry, including feedstocks, building blocks, intermediates, plastics, fibers, and elastomers.
Jeffrey Plotkin, Ph.D., is a noted author, speaker, researcher, patent holder, and instructor on chemicals, technology, and markets. He recently joined IHS Chemical as v.p./training and education. Details about the program can be found at www.ihs.com/chem-edu. Jeff can be reached at firstname.lastname@example.org.