Aromatics demand to lag capacity growth Bruce F. Greek, C&EN Houston
Global benzene supply/demand for mid-1990s Overcapacity of major aromatic chemicals likely will plague producers throughout the world well into the mid-1990s, according to marketing experts meeting last month in Houston at a seminar entitled "Petrochemical Forecasts in an Uncertain World." Sponsored by consultant company Chemical Marketing Associates Inc. (CMAI), seminar participants also predicted that aromatics demand will grow at moderate rates but supply from new plants and shifts in gasoline formulations will hold down plant utilization rates despite scrappage of some production units. Earnings from these aromatics are expected to drop this year and next, and then to recover later on. Profit margins this year for aromatics and other chemicals likely will be better than the demand-capacity relationship would indicate, because of lower prices for crude oil. Prices of crude oil, from which some aromatics are derived, will increase on the average during 1992 and will continue to rise as worldwide economic growth boosts energy demand, says Arved Teleki, president of Hydrocarbon Consultants in Houston. Because of environmental constraints on the use of coal, nuclear power, and hydropower, the slow growth in energy conservation programs, and instability in the Middle East, oil and gas will meet much of the load of growing energy demand. Consequently, petrochemical producers will have to pass on the costs of feedstock and energy or face lowered margins. Teleki forecasts that in 1996 the average refinery acquisition cost of crude oil will reach $36.50 per barrel in current dollars, which is higher than the all-time high of $35.24 in 1981. In constant 1990 dollars, he says, the 1996 price would translate to about $30 per bbl, compared with the 1981 price of $50 per bbl in 1990 dollars. Among the basic aromatics, benzene demand will continue to grow following a slowdown this year. Through 1996, global demand will
Supply source
Pyroiysis gasoline 36%
Coal 6%
Derivative demand
Ethylbenzene
54% Reformate 34%
HDA/TDPa 24%
Cumene 17% Other-
5% 17%
NB/Anilt 3%
Cyclohexane
Alkylbenzenes 4%
Projected 1996 consumption = 8.4 billion gal \ s
a Hydrodealkylation or disproportionation of toluene, b Nitrobenzene and aniline. Source: Chemical Marketing Associates
average 4.1% annual growth, says Mark A. Fisler of CMAI. U.S. demand alone will grow 4.3% per year, spurred by a continuing increase in the use of benzene to make ethylbenzene, he says. That use will grow an average of 5.4% annually. In Japan, growth in benzene use, at 3% annually, will remain below the world rate, says Fisler. Growth in Japan is being stifled by the rapid increase in capacity in the Pacific Rim outside Japan. Shifting feedstocks from benzene to toluene to make cumene also causes a decline in this use of benzene. A shift in making adipic acid directly from benzene also will cause another application of benzene, that of making cyclohexane, to fall. This decrease will be offset by a significant jump in the all-other uses category. Japan also will encounter a major overcapacity situation if all of the proposed toluene dealkylation capacity is built on schedule before 1996. The other Pacific Rim countries, as well as Australia, China, and India, will support benzene growth of more than 13% annually through 1996. Much of the growth will be the result of increasing demand to make e t h y l b e n z e n e for styrene. Meeting the demand for making derivatives could require increasing benzene imports to continue into,
for example, South Korea. Behind these continuing imports are optimistic expectations of the amount of benzene to be obtained from pyrolysis gasoline as a coproduct in the making of ethylene. Low benzene production may result from any construction delays and operating problems with steam crackers in South Korea. In Western Europe, demand for benzene will grow about 2.5% annually between 1990 and 1996. The lower rate could result partially from inclusion of East Germany's production and consumption into Western Europe totals. A n o t h e r cause for lower growth stems from slowing demand for ethylbenzene, says Fisler. Shifting from benzene to n-butane as the feedstock for making maleic anhydride in Europe also is a contributing factor in the slower growth. Some unusual changes in the benzene business are expected to come from implementation of the Clear Air Act amendments. For example, the use of more oxygenated compounds in gasolines may lead to a surplus of higher octane hydrocarbons, such as the aromatics, and to lower and more stable prices for these hydrocarbons. The economics of hydrodealkylation of toluene to benzene will continue to set the basic floor price for April 1, 1991 C&EN
23
Business
ρ -Xylene capacity use to remain low Average global operating rate, % 90
80
70
rx^
60
J 0 1986 87
I 88
89
90
91
J 92
I 93
I 94
L 95 96
Source: Chemical Marketing Associates
benzene, but fewer and less dramat ic price fluctuations will occur, ac cording to Fisler. If catalytic reform ers are operated less severely to re duce aromatics production because the demand for octane values is off set by the oxygenates, less coproduct hydrogen will be made. Therefore, pressure to find hydrogen will affect economics of both hydrodealkylation and manufacture of cyclohexane. Another basic aromatic facing rap idly increasing overcapacity is p-xylene, Graham Copley of CMAI Eu rope told the seminar. Large addi tions to capacity are driving down average plant operating rates even as global consumption rises. In 1991, the rate will fall below 70% before beginning a slow climb up to about 77% by 1996. The operating rate in the U.S. will continue to drop from more than 93% in 1988 to under 75% in 1992, before it resumes a climb, possibly spurred by closing of some capacity in 1993. After climbing in the second quarter of 1990 and then declining late in the year, pricing of p-xylene in the future will vary with several possible scenarios. The need for aro matics in gasoline influences pric ing. This results in a floor on p-xylene prices based on the value es tablished for the mixed xylenes stream from which p-xylene is ex tracted. Mixed xylenes are valuable because they can be blended into gasoline, Copley points out. That value may be reduced if the aro 24
April 1, 1991 C&EN
matic content of gasoline is re duced as a result of reformulation. If use of mixed xylenes is reduced, then low prices for p-xylene prob ably would make it unprofitable to recover mixed xylenes from refor mate or pyrolysis gasoline. Mixed xylenes could reach a value close to that of naphtha, a feedstock for steam cracking. Copley forecasts that contract prices for p-xylene then would be in the area of about break-even cash margins, or in the range of 15 to 20 cents per lb this year, rising to around 30 cents per lb in 1996. To cover capital replacement, prices would have to be 8 to 10 cents per lb more. Most U.S. and Western Eu rope p-xylene capacity now is fully depreciated, and producers will not show a loss if the mixed xylenes feedstocks cost as little as gasoline blending alternatives or less. Need for capacity and high profit ability from making styrene in the late 1980s led to a r e m a r k a b l e a m o u n t of n e w capacity b e i n g planned for the short and long term, Steve A. Knight of CMAI told the seminar. Capacity in the world, if all plans are completed, will increase from about 14.7 million metric tons in 1990 to more than 20 million met ric tons in 1996. A more pressing problem is that more than 75% of the a d d i t i o n a l capacity for the monomer is planned to be operating by the end of 1993. Some shuttering of capacity may occur because of the overcapacity.
Plant rationalization will help styrene operating rates Global styrene demand, billions of lb 50 With plant shutdowns
Global plant operating rate, % 100
Λ
40
95
J90
30 20
Demand
J 85 Without plant shutdowns
J 80
10 j -
1987 88 89
J L 90 91 92
93
94 95
Source: Chemical Marketing Associates
0 96
Decisions to shut down capacity will be based on upstream and down stream integration, location, and economic factors, Knight says. For example, some 200,000 metric tons of U.S. capacity is considered al most certain to be closed because it is old, inefficient, and lacking inte gration. Growth in demand for styrene will be relatively low in the U.S. For 1990 to 1996, K n i g h t forecasts growth of 3.8% per year. But, if the years of slightly d e c l i n i n g de mand—1989 and 1990—are includ ed, then the average growth rate be tween 1988 (the previous peak year at 8.1 billion lb) and 1996 will be just 2.2% per year. Exports of styrene are forecast to help keep plant operating rates go ing up. The new highly competitive capacity of the U.S. will keep U.S. exports strong as demand grows in developing countries. Global demand for styrene is fore cast by Knight to exceed 41 billion lb in 1996, up from 26 billion in 1987. Growth between 1990 and 1996 will average 5.3% annually. Even if no obsolete styrene capacity is shut down, plant operating rates will increase after 1993, from a low expected of about 87%. Rationaliza tion of styrene capacity could re verse the drop in operating rates ex pected next year. Then shutdowns would be more than offset by new capacity, with the rate declining in 1993, before climbing back to 97% of capacity in 1996. Profit margins in cents per pound for styrene will not return to the al most unprofitable levels of the early 1980s. However, they will fall sub stantially from the range of 10 to 20 cents per lb between 1987 and 1990. Margins likely will bottom out at around 2 cents per lb next year for contract sales, Knight ex pects. Export or spot margins then also will return to higher levels af ter declining to almost n o t h i n g this year. This lower profitability now faced by styrene makers will inhibit plan ning for new capacity in the 1992 to 1994 period, says Knight. Therefore, he expects to speak at a CMAI semi nar in 1996 with a title something like "Styrene—Too Much Demand, Too Little Capacity." D
