2Scope of the StudyTo study the market demand and supply scenario (current and next twenty years) for the following petrochemical feedstocks and solvents in Indian, Asia Pacific and Asian RegionEthylenePropylene (both chemical and polymer grade)Benzene, Toluene and XyleneIsobutyleneButene-2LAB feedstockHexaneNaphthaleneCoke
3Methodology Primary and Secondary Survey Past Trend Analysis to build a demand forecasting model
8Feedstock Usage Japan: Naphtha Based Korea: Naphtha Based Taiwan: Naphtha BasedASEAN: Gas/Naphtha BasedChina: Naphtha/Gas oil BasedIndia: Gas/Naphtha BasedMiddle East: Mainly Gas BasedMiddle East highly competitive on account of cheap gas. Other countries gas cost is relatively high. Naphtha based crackers have profitability pressures whenever crude prices harden
15India Ethylene Key Issues Slowdown in domestic demand post commissioning of crackersEarlier there were Supply constraints, supply constrained demand got satisfiedIn India, high level of recycling, So demand is even more price linkedPlastic processing industry uncompetitive and facing competitive pressures both in exports market and domestic.States of western India consume bulk of ethylene largely because of significant processing capacity in that locationAfter commissioning of HPL and GAIL crackers, the capacity for plastic processing has increased in the northern and eastern India.
18Statewise Ethylene Demand Based on location of plastic processing and textile industry and estimated consumption of ethylene in those industries.
19Regionwise Demand and Share in GDP Imbalance on account of large capacity of plastic processing and textile in Western India.Significant amount of finished plastic and textile products exported to other regions.
20Propylene: How Produced? Co produced with ethylene in a steam cracker. Negligible for ethane based cracker, higher for propane and for naphtha based cracker, nearly 50% of ethylene productionCo produced with gasoline. Yield in a typical FCC unit 2-4%, In two high olefinic modes, propylene yield can be 10% (as in Reliance) and 20% (deep catalytic cracking as in one of Thailand units and some plants in China)Propane Dehydrogenation. Highly Capital intensive, Can be a good source with cheap propane which can be available from countries with high quantites of wet natural gasMetathesis. Low Capital Intensity. Uses ethylene and butylene-2 as raw material. Can be effective if ethylene prices are low.Methanol to olefins: Moderately capital intensive. Requires cheaply available methanol
29Ethylene to Propylene Prices Fast demand growth for polypropyleneMore importantly, little co product production in Middle East gas based crackersSo, profitability for naphtha based crackers higher in propylene
36Paraxylene: Where used? PX used to produce both PTA and DMTPX demand derived from polyesterPolyester used in textiles as fibres; in plastics (PET bottles), films (various uses) and other products.Largest use is in fibres, PET bottles hold significant demand in the developed countryPX more important than Benzene in Asia primarily because of large textile industry in Asia
37Other BTXOrthoxylene primarily used in production of pthalic anhydrideToluene used in tolylene di isocyanate, solvents and various chemicals
49Isobutene: Technology Driven End Products Technology for butyl rubber available with few and not easily sharedHigh Purity Polyisobutylene technology also difficultMMA technology from isobutylene also difficult + risk of new technology getting developed
50Large Production of Isobutene compared to non-fuel use As against a net chemical demand of less than 1 million tonne, Asian isobutylene capacity was estimated to be higher than 5 million tonnes in 2003.A significant portion of the isobutylene production in Asia is converted to Methyl Tertiary Butyl Ether (a high octane gasoline blending component). Further, it can directly be blended with either gasoline or LPG.
51Butyl Rubber-Largest Chemical Use Used in tubes and tubeless tyresButyl rubber estimated demand for isobutylene is close to 0.33 mn tonne in Asian region.Only two capacities in Asia. One owned by Japan Butyl rubber and second by Sinopec Beijing Yanhua. A bulk of this demand is actually met by imports from Canada and Russia.With rising production of tubes and tubeless tyres in the region, the demand for butyl rubber has increased significantly.
58N Paraffins: Where used? The predominant use of n paraffins is in manufacture of linear alkyl benzene. More than 85% of n paraffins worldwide are used for production of linear alkyl benzene.The other uses of n paraffins include production ofHigh grade alcohol,chlorinated paraffin,nitro-alkanes and amines,Sulphoxidation or sulphochlorination for surfactant or plasticiser manufacture,Raw material for microbiological oxidation or fermentation process anddirect use as a solvent in many applications.
59N paraffin PricesThe prices of n paraffin are dependent on the prices of kerosene, which, in turn, are dependent on the prices of crude oil.With the return stream of n paraffin extraction plant (about 80% of original stream) being thus valued at much lower value, the prices of n paraffin would be equal to differential between two kerosene streams applied to n paraffin plus the cost of volume of n paraffins plus other costs and are thus, significantly higher than the prices of kerosene (differentials are around US$ per MT).Over the last ten years, there has been an increase in merchant sales of n-paraffins to new LAB plants in the developing world. At the same time, supplies of traditional feedstocks that are rich in n-paraffin have declined. The production of normal paraffins is influenced by the availability of n-paraffin-rich kerosene at the n-paraffin producing facilities. This has been in relatively short supply, compared to previous years, contributing to the tight market situation and high prices of n paraffins.New Fischer-Tropsch units designed to meet the growing demand for low-sulfur fuels are expected to provide new supplies of coproduct paraffins, possibly in large quantities, bringing much respite for standalone producer.
60Hexane Key Issues90% of demand arises from edible oil sector wherein its low cost and high level of usefulness lead to its dominationOut of total solvent demand, edible oil extraction is about 2% of the demand in a mature market.Health concerns over Hexane on account of its established linkage with inducing neuropathy if consumed in significant quantities. On a health hazard spectrum of n-Hexane registers Most exposure cases reported at worksites and related to inhalation
63Why is consumption declining? Oilseeds availability in India is uncertain and inadequateTherefore, Crude edible oil getting increasingly imported in India to meet growing demandEdible oil extractors have been inefficient in using hexane as solvent and with improving efficiency levels, their per unit hexane consumption has been decliningOn an average, extractors in the US& EU consume less than 20% of Indian per unit hexane consumption in edible oil sector
65Asian Hexane Demand Supply Asian production of hexane assuming a 5% of gasoline as hexane production would be close to 7.5 million tonneRequired extraction for edible oil sector is only around 0.6 million tonnes.Extraction capacities in India, China, Malaysia, Indonesia
66NaphthaleneCan be produced from Met-coke/RefineriesUsed in manufacture of PAN; Construction; TextilesAsian region – Potential Supply position is over 5 times the demand. Major deterrent for capacity addition.Naphthalene content in crude around 0.5 to 2% so a 10 million tonne refinery would have 100,000 tonne production
69Statewise Naphthalene Demand (0.35 million tonnes)
70Coke Two major grades – Calcined and non-calcined Calcined coke commands price premiumPower Generation, Cement, Aluminium – major industriesStrong volatility in product demandJapan – Leading consumerIndia, China – Surplus situation
80Hexane: Demand Determinants Hexane consumption linked to growth in edible oil extraction through solvent extraction processesWith import of edible oil, this may not be linked to GDP growthAlso, efficiency of solvent extraction process in India and other Asian countries is on the rise on account of inefficient facilities.
86SSI Reservation limits Indian Downstream Plastic Processing Sector
87Textile Industry linked to GDP Growth Industry OverviewTextile Industry linked to GDP Growth
88Agreement on Textile & Clothing Agreement on Textile and Clothing has given way to application of WTO framework on international textile tradeFor the first time in last four decades, free textile trade to take placeIncrease in export market for developing countries as also increase in competitionAlthough China, can expand its share at the cost of others single handedly, however, developed world unlikely to have single supplier. In addition, China joined WTO late and so developed countries have an option of imposing restrictions of Chinese growth
89Asia Becoming a Manufacturing Base to Supply to World
95Feedstock Situation Middle East has large gas reserves Oil demand set to rise on account of increasing developmentOil trade likely to increase as more demand increases in India and China wherein crude production not increasing sufficiently.FSU/Middle East to be the main suppliers to meet increase in demandMiddle East needs to increase oil capacity in case it plans to meet this demand.In past, whenever, Middle East capacity utilisation has been high, prices have gone high.However, even availability of reserves in Middle East is an issue. Saudi Arabia not able to increase production. Reserves not updated.Oil prices and consequently naphtha prices to remain high.