P.1 

OAR Box 1872 

Prepped by Keeia Richards 

Document Number: 

7) 11-1-56 

Docket Number: 

A-90-19 

Printed 11/26/2008 8:51:47 AM Sheet 7 of 204 
P.2 

PETROCHEMICALS A-90-19 

II I 56 

mercially available propylene for them. 

They'll either be deferred, delayed, or 

not run at capacity. It will be our salvation." 

The good health of the PP industry 

in the past couple of years stems from 

the wave of rationalization that swept 

Europe and the U.S. in the mid-1980s. 

Now, it's the wave of PP plant building 

in developing markets that is giving 

most producers the jitters. There are 

sufficient projects on paper in South 

America to take that continent from a 

net importer to a net exporter of PP. 

Shell plans capacity in Brazil and 

Argentina, and there are schemes afoot 

in Colombia—with two-thirds of its 

output destined for export—Venezuela, 

and Mexico. New plants in Thailand 

and Malaysia are also reckoned to be 

export market-dependent. As a result, 

1990-91 look as if they'll be "very difficult years" in PP, says a source with 

Shell International Chemical (London). 

The excess of PP capacity may be a 

mixed blessing for the business, since 

it'll enable the sustitution process to 

keep right on going. In the past couple 

of years, displacement of polystyrene 

by PS has been a noticeable trend. "The 

differential got so large. The best example is in cutlery," says Frank Andrusko, vice president for marketing/ 

polymers at Amoco Chemical (Chicago). He sees that process continuing 

and regards substitution of high-density polyethylene a major factor as well. 

"A great many fabricators in the injection-molding business are talking about 

substitution, or working on it, but only 

two customers of ours did," says Mike 

Kimmins, polypropylene sales manager at Phillips 66 (Pasadena, TX). One 

example was a 20-million lb/year 

LLDPE/HDPE account that switched to 

PP in the latter part of 1988, motivated 

as much by availability as by price, he 

says. 

While it's a product that is dramatically increasing its penetration of other 

markets, not everyone is convinced PP 

is a juggernaut that'll roll other commodity polymers flat. "I think the inter-competition issue is overblown," 

says Bill Stavropoulos, group vice 

president/plastics and hydrocarbons at 

Dow Chemical, which produces a wide 

spectrum of resins ranging from PVC to 

polycarbonate but, significantly, not 

including PP. "It's much less important to the business than replacement 

of traditional materials by plastics." He 

notes: "PP is a very versatile material, 

but it's been haunted by overcapacity 

in the past, and will be again in the 

future." 

PTA: A RUNAWAY TRAIN 

"Pure terephthalic acid (PTA) demand outstripped expectations in 1988 

and is going like a train in 1989," 

comments Charles Glastonbury, fiber 

intermediates business manager with 

ICI Chemicals & Polymers Div. (Wilton, UK). 

That PTA demand shows no sign of 

easing is, Glastonbury believes, significant. He notes polyester producers have 

not only absorbed monoethylene glycol (MEG) price hikes already this year, 

but they have also absorbed para-xylene increases passed on by PTA producers. Polyester and PET selling 

prices, however, 

have not risen correspondingly. 

Since polyester 

raw materials prices 

have now passed the 

point at which they 

could choke demand, Glastonbury 

reckons this shows 

"people are now 

locked into using 

polyester fiber, film, 

and PET." It also ^mm^

m

^

mm^ 

suggests, he says, 

that demand elasticity linked to price 

has been overestimated. 

Market observers seem to accept this 

scenario but agree polyester price increases would help ease the pressure 

on PTA. 

"Producers can't push too hard. They 

may get second-quarter rises, but for 

[the third and fourth quarters] it's 

anyone's guess," says one. 

Currently prices stand at $765/m.t. 

Far East c.i.f, but some smaller producers are selling into the growing spot 

market at levels around $900/m.t. In 

Europe, levels stand at DMl540/m.t. 

FD, while in the U.S. prices are near 

31.2 cts/lb FD. 

ICI says there's now more demand 

than it can supply. Glastonbury figures 

regular customers in Europe and the 

U.S. are getting the supplies they need, 

but he says a shortage exists in the Far 

East, India, Pakistan, Latin America, 

and Africa. 

World PTA capacity is about 6 million m.t./year. Petrochemical Consultants International (PCI; Crawley, UK) 

calculates another 6 million m.t. will 

be added by 1995. 

Growth in PTA consumption will 

be almost 10%/year, PCI estimates. 

Some 6.5% will be due to the overall 

growth in the polyester market and the 

The market 

is tight 

outside U.S. 

and Europe 

balance taking market share from dimethyl terephthalate (DMT). Of the new 

capacity, some 4.5 million m.t. is bei ng 

installed in Asia, which will accou;;: 

for 40% of world capacity and 50% ..' 

world consumption by 1995. 

If this capacity expansion moves 

ahead as planned, PCI foresees a PTA 

surplus of 1 million m.t. by 1991, rising 

to 1.5 million m.t. by 1995. But this 

presupposes a very high operating rate, 

and the U.K. consultants suggest that 

the surplus will not necessarily be too 

traumatic. However, PTA margins are 

forecast to weaken by mid-1990. 

Amoco Chen::-

cal, the biggest 

I U.S. PTA producer, is less bullish than PCI on 

growth. According 

to Richard Marion, 

marketing manager for fiber and 

film intermediates, demand

 :-i 

likely to rise by 

^^^^^^ ^ 4.5%-5% over the 

•TM*—"•^•••'•••^ next 10 years, and 

by 6.5%-7.1% 

over the next five. 

ICI Chemicals and Polymers says 

PTA demand grew 14% last year, driven 

by an 8% rise in polyester fiber consumption, a 20% hike in PET usage, 

and replacement of DMT. 

To meet this strong growth, ICI wii'i 

expand PTA capacity at Wilton from 

500,000 m.t./year to 550,000 m.t./year 

by mid-1989 and is involved in two Far 

East projects. 

"In Taiwan, it is our firm intention 

to have a 350,000-m.t. plant by end 

1991," says Glastonbury. P-xylene will 

be sourced from world markets, and ICI 

is confidently negotiating for supplies. 

He reckons Taiwan will be the biggt-i-f 

polyester producer in the world by 

1992, ahead of the U.S. and Europe, 

and he adds that "ICI is determined to 

have a presence in the largest market in 

the world." The U.K. giant is also planning a 250,000- m.t./year PTA plant in 

Thailand. It will hold a 40% stake in 

this unit, which is due on stream by 

end-1992. 

On the technology front, there are 

only three suppliers—Amoco, ICI, ant! 

Mitsui—which, Glastonbury believes, 

will ensure that no "profligate investment" occurs. 

While there have been no major 

advances in technology, gradual im26 Chemicalweek/March 29, 1989 
P.3 

*> 
Ii 

provements have been made in the past 

five years. Both Amoco and ICI processes are based on air oxidation of pxylene. Glastonbury believes better 

stoichiometric efficiency and energyconsumption levels have been 

achieved, along with major improvements in purity. 

For PTA producers, the good news 

is that the switch from DMT to PTA 

looks to be speeding up in the coming 

years. New polyester plants use PTA 

because on a pound-for-pound basis, it 

yields more polyester than DMT. And 

whereas DMT processing yields methanol, which has to be recycled, PTA 

simply yields water. According to PCI, 

DMT is required for a number of specific types of polyester products. But 

the consultants think new DMT plants 

will only be built in developing countries from now on. 

In Europe, Hiils AG (Troisdorf, West 

Germany) is the biggest merchant DMT 

seller, operating 400,000-m.t./year capacity at Liilsdorf and Steyerberg. The 

only other seller is Hoechst, with some 

40,000 m.t./year available after captive 

use. According to Anfried Lange, DMT 

marketing manager in the group's fiber 

raw materials division, polyester producers have been taking DMT when 

PTA supplies have been short. He says 

;urrent demand levels are "higher than 

anticipated," and since intermediates 

plants are run as close to capacity as 

possible, there isn't much slack. 

Hiils plans not to lift DMT capacity 

but to switch part of its DMT production to PTA "in the near future," as 

some of its customers change from DMT 

to PTA. Lange says PTA capacity will 

be anything from 50,000-150,000 m.t., 

as Hiils can make the conversion in 

••.mall, low-cost steps. 

A PROSAIC MARKET TURNS HOT 

Right now, maleic anhydride is a 

nice business to be in. Industry veterans, accustomed to oversupply, say for 

the first time in over 25 years, a world 

shortage exists. As Terry Baker, a consultant with Chem Systems (London), 

remarks: "Maleic used to be a pretty 

boring chemical. But it really has blossomed in the last couple of years." 

In the U.S., where the number of 

producers dwindled to just five, operating rates have been well over 90% in 

the past year. 

Last year, U.S. consumption was 

about 410 million pounds, while output of 425 million pounds was marginally below nameplate capacity. For 

1989, output will be considerably in 

excess of this figure. 

Monsanto expects to have raised its 

capacity at Pensacola from 185 million 

to 240 million lbs/year by September, 

and both Amoco and Mobay anticipate 

incremental increases during the year. 

No new maleic anhydride plants are 

planned in the U.S. In Europe, which 

has suffered shortages of maleic in the 

past year, consumption in 1988 is estimated at 365 million pounds compared 

with total production capacity of 360 

million pounds. According to Charles 

von Doersten, maleic anhydride business manager at Monsanto Chemical, 

this deficit has pushed European prices 

10 cts/lb higher than in the U.S. 

This shortage has prompted a number of new plant announcements in 

Europe which, some observers believe, 

could lead to overcapacity in the mid1990s. Monsanto has almost completed 

a capacity hike from 25 million to 60 

million pounds at its Newport (Wales) 

MALEIC ANHYDRIDE AND DERIVATIVES 

DOWNSTREAM OPPORTUNITY REVIEW 

New.Markets^||l | Maleic Anhydride 

• N-Phenyl Maleimide 

• Malic Acid 

• New Copolymers 

1,4 Butanediol 

Derivatives 

Technology 

Gamma-B'utyrolactone 

Traditional Markets 

• UPR 

• Lube Oil Additives 

• Agncultural Chemicals 

CHB® tis 

;Tetrahydrofurdh 

1

 Elastomers • Eng. Resins 

• Fibers • Paint Removers 

• Blends • Process Solvent 

• PVC Cement 

'Personal Care • Magnetic Tape 

• Pharmaceuticals • Pharmaceuticals 

• Elastomers 

• Blends 

Source: BP Chemicals 

plant and is planning a major new 

European facility to be on stream by 

late 1992. Meanwhile, Cepsa has plans 

for a plant in Spain, and Alusuisse 

intends to build a new facility in Italy, 

while DSM and Alusuisse are also 

studying a new joint venture project. 

If European consumption grows at 

GNP, then in the event of all new maleic 

plans going ahead, overcapacity will 

occur sometime in 1993. However it is 

also likely that European producers 

may follow the U.S. and convert from 

benzene to butane feedstocks. This 

process can, according to some claims, 

cut plant capacity by 20%. But others 

believe the impact of feedstock conversion on output has been negligible. 

In the Far East, where demand 

growth has been above the trend in 

Europe and the U.S., a plethora of new 

plants are announced or under way. In 

Taiwan, Union Petrochemical and 

Grand Pacific Chemical are building a 

35,000-m.t./year unit based on Monsanto's fixed-bed technology, and Taiwan Synthetics has a 14,500-m.t./year 

plant under way. 

BP America has teamed up with 

Mitsui Toatsu in a 10,000-m.t./year 

joint-venture plant in Japan, which is 

now on stream. This unit utilizes the 

fluidized-bed process based on BP and 

UCB technology. Another 15,000-m.t./ 

year unit is being built by Japan's ShinDaikyowa Petrochemical. This plant, 

along with Taiwan Synthetics'facility, 

is using the ALMA fluidized-bed process from Lummus Crest and Alusuisse. 

Despite some fears for overcapacity, 

producers remain very optimistic. "We 

wouldn't be contemplating such major 

investment if we weren't," comments 

Monsanto's von Doersten. In tandem 

with Du Pont, his company is developing a transport-bed production process 

that may be commercialized before 

1995. Du Pont, along with BP Chemicals, currently sees possibilities of 

producing 1,4-butanediol from maleic 

that could be used to make engineering 

resins, fibers, and elastomers. 

BP and Amoco, meanwhile, are both 

showing interest in joint ventures and 

investments in Europe. "We want to 

participate in investments rather than 

just sell licenses," says Douglas 

Campbell, president of BP Chemicals, 

recognizing that "the danger of competing technologies is overbuilding." 

PETER R. SAVAGE 

with PETER COOMBES. 

and DAVID HUNTER in Paris 

March 29,1989/Chemicalweek 27