Stable Demand Growth of Propylene Oxide   
By Chi Hongquan   

Rapid expansion of capacity

China has nearly 20 propylene oxide producers including CNOOC and Shell Petrochemicals Co., Ltd., Shandong Binhua Group Co., Ltd., Jinhua Chemical (Group) Co., Ltd., Tianjin Dagu Chemical Industry Co., Ltd. and Sinopec Shanghai Gaoqiao Petrochemical Co., Ltd. Most of them use the chlorohydrination process. CNOOC and Shell Petrochemicals Co., Ltd. owns the biggest propylene oxide unit in China with a capacity of 250 000 t/a. It uses the propylene oxide/styrene co-production process and the production cost is lower than the conventional chlorohydrination process. China's propylene oxide capacity was 1.189 million t/a in 2008 and output was 725 000 tons, an increase of 11% over 2007.
   The capacity of propylene oxide in China expanded remarkably from 2004 to 2008. With impacts from the global financial crisis, however, the growth of demand for propylene oxide in downstream producers has slowed down since the second half of 2008. The construction of new and expansion propylene oxide projects has also been affected. Around 350 000 t/a of new propylene oxide capacity is expected to go on stream in China from 2009 to 2010, bringing the total capacity to 1.54 million t/a.

Downstream consumption based on polyether polylol

Owing to the completion of many new and expansion units in recent years, the supply and the demand for propylene oxide in China now tend to be balanced. The price drop of propylene oxide has led to an adequate raw material supply and a remarkable output increase of downstream products such as polyether polylol, dimethyl carbonate and propylene glycol.
   Apparent consumption of propylene oxide in China was 878 000 tons in 2008, an increase of 10.3% over 2007. Consumption of propylene oxide in polyether polylol segment accounts for 69% of the total, being 9 percentage points higher than the worldwide average. The consumption proportion is 16.6% for surfactants, 3.3% for propylene glycol, 2.8% for propylene carbonate and 8.3% for others. In the next few years polyether polylol will remain the major sector consuming propylene oxide and the proportion used for propylene glycol production will increase significantly.
   The major region consuming propylene oxide is eastern China, accounting for around 50% of the total. Southern China, northeastern China and northern China also consume a considerable amount of propylene oxide, 23.1%, 11.7% and 9.3% of the total, respectively. Consumption in southwestern China and northwestern China is relatively small, accounting for only 3.0% and 2.6% of the total.
   Starting from the early 1990s China's consumption of propylene oxide grew rapidly, with annual growth averaging 22.6% between 1990 and 2005. With the slowdown of development in downstream sectors since 2005, the growth of demand for propylene oxide has been lower, but the average annual growth has still hovered around 10%. With impacts from the global financial crisis, the growth of propylene oxide demand has slowed down further since the second half of 2008. In the long run, however, the demand for propylene oxide for use in downstream products such as polyether polylol and propylene glycol will still increase steadily. It is expected that the demand for propylene oxide in China will reach around 1.0 million tons in 2010.

Supply and Consumption of Propylene Oxide in China in Recent Years
(thousand tons)
Year    Output    Import    Export    Apparent consumption
2002    320        53         -        373
2003    414       116        1         529
2004    430       191        1        620
2005    513       151       10       654
2006    680       120       15       785
2007    653       147       4        796
2008    725       153        -         878
Source: CNCIC