The changing dynamics of global benzene supply
By Eshwar Yennigalla and Hetain Mistry | July 14, 2015 12:01 AM Comments (0)
Benzene is a primary aromatic and the precursor for the C6 value chain, and finds itself at crossroads in relation to the aromatics main outlet of supply. Benzene supply is traditionally dependent on gasoline production out of the refinery and as a co-product of naphtha cracking.
However, massive projections for increased polyethylene terephthalate demand in Asia led to a wave of investments in paraxylene production units and resulted in growth of benzene production as a by-product from these units. Also, with major refinery expansions in the Middle East (especially processing heavier crude, which yields more benzene) and Asia, as well as move to lighter cracking for ethylene production in the US and the Middle East, benzene supply dynamics globally have changed. Benzene is no longer just dictated by the traditional means of supply.
In 2014, Asia witnessed new benzene capacity of 1.84 million mt, concentrated largely in South Korea, as by-product of paraxylene production. Another 3 million mt of production is expected to be added in the next five years in Asia alone. New benzene capacity additions based on paraxylene production in the Middle East, especially in Saudi Arabia, will reach 2.3 million mt in same period. Also, as the Middle East looks to crack heavier feedstocks for olefin production, a trend of increasing benzene output from olefin production is expected from the region. The upcoming Saudi SADARA project is an example of this.
Moving to the American and European markets, they have not witnessed benzene production growth mainly due to a lack of demand for paraxylene and a change in production dynamics of ethylene.
The shale gas phenomenon has revived what was a dying US petrochemical industry by pumping life back into it, providing ample low-cost gas-based feedstock ethane for its crackers. However, not all value chains have benefited from the greater cracking of ethane, as lighter cracking has meant less pygas/benzene being yielded. With the majority of US crackers switching to natural gas liquids, aromatics supply from the cracker has fallen in recent years.
In Europe, benzene production has fallen due to increased cracking of LPG, substituting naphtha in ethylene production, as well as lackluster cracker operating rates in recent years due to high naphtha costs.
Global benzene demand is on a rise. Benzene value chain products are extensively used as essential plastics, fibers, foams and resins in automotive, pharmaceutical, construction, IT equipment and clothing industries. Global benzene consumption is estimated to increase with a 3.5% compounded annual growth rate in the next five years, creating a need for more investments in expansions for benzene production, beyond what has already been discussed. However, currently benzene is largely produced as a co-product and current low margin levels of on-purpose benzene production route from toluene technology fail to attract interest in the once-dominant process. Therefore, if this does not change and benzene demand growth steadily increases, deficits of the primary aromatic is forecast to stay.
In 2014, estimated benzene consumption was 45 million mt, of which benzene used in styrene production accounted for 55% of the total demand. Styrene is used to manufacture polystyrene, synthetic rubbers and foam based plastics for applications ranging from household appliances to automotive parts to IT products. Styrene demand in manufacturing industries is closely correlated to GDP and purchasing power of the consuming regions. However, styrene demand in the manufacture of IT products is currently witnessing a major decline.
Major growth in benzene consumption is projected in the form of cumene production as demand increases for cumene-based phenolic resins in the construction industry, especially in Asia, led to major investment in new cumene-phenol units. More than 3.1 million mt of new phenol capacity will be added in the three-year period between 2014 and 2016 in Asia and Middle East to meet the growing demand.
Furthermore, it’s anticipated that aniline demand will grow in Asia, where it accounts currently for 16% of benzene production, as Asia looks to using more MDI, the major end-product aniline, in order to produce more polyurethane applications, such as various foams, with the growing construction industry.
The American and European markets continue to consume larger portions of these intermediate benzene value chain chemicals. However, continued deficits of the precursor benzene in these regions leaves these western markets in continual deficits in the period forecast by Platts Petrochemical Analytics.
East to supply West
Finally, as a result of the discussed supply and demand trends for benzene, Platts Petrochemical Analytics expects a shift in supply trends for benzene as the East of Suez is expected to increasingly supply the West of Suez. With demand growth continuing to grow at steady rate in Europe and the Americas, with flat-lining supply in those markets and the Middle East and Asia ramping up supply above and beyond demand, the East of Suez will establish itself as a major supply center to Western markets.
This dynamic is more likely to play out than more capacity being added to the West of Suez, as benzene, unlike some other chemicals, is an easily shipped and traded product, with freight costs at much lower levels than aromatics. In recent years, we have seen US markets awash with Asian benzene, mainly from South Korea, and Middle East benzene increasingly flowing to Western Europe.
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