Shell defines propylene oxide as a chemical building block used for the manufacture of a versatile range of commercial and industrial derivative products including polyether polyols (60-70% of PO consumption), propylene glycols (20% of PO consumption), propylene-based glycol ethers (5% of PO consumption), flame retardants, modified carbohydrates (starches), synthetic lubricants, oil field drilling chemicals, textile surfactants and other products. According to Dow, these products are employed in a broad range of applications including construction, automotive industry, furniture, bedding, appliances, decorative molding, athletic equipment and more. In fact, Shell with its impressive 641k mt/y propylene oxide capacity scattered between different facilities in Singapore and Netherlands is not the biggest player worldwide. The global capacity leaders in propylene oxide are Dow Chemical Co (1.925 mln mt/y of PO capacity in the USA, Germany and Brazil, plus 390k mt/y of PO capacity in Thailand operated by SCG-Dow Group, a joint venture between Dow and SCG) and LyondellBasell Chemical Co. (1.71 mln mt/y of PO capacity in the USA, Netherlands and France, plus ~300k mt/y PO capacity in Netherlands operated by Lyondell Bayer Manufacturing Maasvlakte VOF, a joint venture of Bayer AG and Lyondell Chemical Company). Additionally, LyondellBasell announced plans to build a U.S.-based ~400k mt/y propylene oxide facility, which could become operational in 2019. Dow is also building, in cooperation with Saudi Aramco, the world’s largest integrated petrochemical complex in Al Jubail Industrial City (Saudi Arabia), which will manufacture propylene oxide. As these three companies, Dow, LyondellBasell and Shell, control nearly a half of global propylene oxide capacity, any manufacturing issues, like, for instance, a fire at Shell’s Moerdijk chemical complex in the Netherlands in 2014, might be detrimental for, at least, regional propylene oxide markets. Above examples illustrate large geographical sprawl of manufacturing facilities of various propylene oxide producers, which is convenient in serving various propylene oxide markets.
Propylene Oxide: structure of the global capacity by country, 2014
As previously alluded to, propylene oxide is a chemical building block, which determines its intermediate nature, both affected by down-stream and up-stream segments. Thus, its market is highly susceptible to feedstock (petroleum) prices, on the one hand, and is predicated on the behaviour of multiple above-mentioned consuming sectors. Each of these consuming sectors demonstrates diverse dynamics, both globally and regionally. Propylene oxide is listed among the top 50 chemicals produced (by volume) in the world, though some say that its global capacities and output are not big enough to consider it a product of prime significance. This duality is deeply imbedded in the character of the propylene oxide market. On the one hand, companies plan new capacities in China, Malaysia, Poland, Russia, Saudi Arabia, South Korea, the USA, etc. in order to meet the steady demand for propylene oxide (global propylene oxide market is expected to reach ~10.2 mln mt/y by 2019). On the other hand, some projects, for various reasons, are cancelled (SADAF project in Saudi Arabia between Sabic and Shell) or to be closed (Nihon Oxirane operation in Japan between Sumitomo Chemical and LyondellBasell).
More information on the propylene oxide market can be found in the insightful research report “Propylene Oxide (PO) 2015 World Market Outlook and Forecast up to 2019”.