Lightweight Raw Materials for Ethylene Challenge the Synthetic Rubber Sector

By Li Meiying and Yan Tieliang, Economics and Development Research Institute of Sinopec

A global trend of making ethylene from lightweight raw materials should worry players in China’s synthetic rubber sector. Natural gas from the Middle East and shale gas from the United States, the most prominent examples, are taking the ethylene industry by storm – riding on their abundance and low prices, and the consequent high yield and low production cost of ethylene. Unlike medium/heavy raw materials like naphtha and hydrocracking tail oil, lightweight raw materials produces less C4, C5, C6 byproducts and other high carbon components, which are basic raw materials for making synthetic rubber like butadiene, styrene and isoprene. China’s ethylene producers still mainly use medium/heavy raw materials today, but with their inevitable adoption of lightweight raw materials, the domestic supply of butadiene, styrene and isoprene will tend to decrease, hampering the production of synthetic rubber.
While they are indeed abundant in nature, the popular lightweight raw materials are far from ubiquitous. Moreover, they bring with them certain limitations for the related downstream sectors in product diversity. So China’s adoption of the lightweight raw materials of ethylene will be gradual. In the short term, this has no significant impact on the existing pattern of ethylene production, nor on the synthetic rubber sector; however, the long-term effects should not be ignored. China’s synthetic rubber sector should take precautions, actively adjust product portfolios and capacity, mitigate the dual problems of overcapacity and product uniformity, and improve the competitiveness and sustainability of the synthetic rubber sector for the coming era of lightweight ethylene raw materials.

1. Lightweight ethylene raw materials are the global trend and pose sustainability choices for China’s ethylene industry

At present, ethylene raw materials around the world fall mainly into two categories: the lightweight raw materials we have been discussing and the medium/heavy materials, mainly naphtha and hydrocracking tail oil. When lightweight raw materials are used for ethylene production, the products are mainly ethylene (the yield of ethylene is more than 70%) and a small amount of propylene, with basically no other byproducts. The major downstream products are polyethylene (PE) and polypropylene (PP). When medium/heavy raw materials are used (the yield of ethylene is around 35%), a large amount of byproducts such as C4, C5, C6, C8 and C9 components are produced, enabling the production of basic chemicals such as PE, PP, acrylonitrile-butadiene-styrene resin (ABS), synthetic rubber, petroleum resin and phenol/acetone.
At present, the use of natural gas for ethylene production is mainly concentrated in the Middle East, and shale gas is mainly used in North America, while the heavier materials remain dominant worldwide, particularly in Asia and Europe.
However, naphtha (a product of atmospheric and vacuum distillation units) and hydrocracking tail oil (a product of hydrocracking units) are both produced from crude oil. Not only does the oil-based production of ethylene have a long process flow and high production costs, but it also depends absolutely on the availability and price of crude oil.
In recent years, after its large scale adoption in the United States shale gas has become the long-term development trend of the ethylene industry around the world. It is expected that the proportion of naphtha in the feedstock of the world’s ethylene units will decline slowly from around 47% in 2012 to 42% in 2020. In Asia, where naphtha is the main feedstock of ethylene, the proportion of naphtha in the feedstock of ethylene units fell from 86.7% to 80.3% in two years, 2010-2012, not displaced exclusively by lightweight materials, but with the steady conversion of the sector to the lightweight materials, the proportion will keep declining.
In 2012, China became the second largest ethylene producer in the world, with a capacity of 16.7 million t/a, surpassed only by the United States. Naphtha and hydrocracking tail oil make up more than 75% of the ethylene production raw materials in China today, and a relatively complete and diversified downstream product chain has formed here (see Table 1), depending on the particular byproducts along with ethylene. However, this mode is restricted by the exhaustion of crude oil resources, constant price increases, more heavy materials being used, difficulties of oil acquisition and the nation’s increasing import-dependence. More and more pressure is felt from production costs and the nation’s growing preference for sustainable development.
In order to adapt to the global trend toward lightweight raw materials as well as China's wealth of coal rather than oil, China’s ethylene industry is actively embracing the lightweight ethylene raw materials, using light hydrocarbons from refineries, oil field-associated gases and coal-based raw materials (coal-to-olefins and methanol-to-olefins) to produce ethylene. Domestic coal-to-olefin capacity has reached 1.7 million t/a, and the total capacity of coal-to-olefin projects being built or planned for construction is close to 28.0 million t/a. China is also blessed with an abundance of shale gas, a new unconventional fossil resource. Shale gas is starting to boom here, and considering the national government’s support for its development and utilization, it is bound to be promoted as a lightweight raw material for ethylene.
On the downside, the comparative paucity of byproducts of the lightweight mode of ethylene production – only propylene, PE and PP – inevitably limit downstream options, and in the short term, also constrain product diversity. Therefore, ethylene production is likely to develop bimodally for quite a long period of time – the heavier raw materials will continue to dominate, but the related output will be reduced, while all the growth will be in lightweight materials.

Table 1   Major product chains of China’s ethylene industry

Cracking component    Main constituent    Major downstream products
C2    Ethylene    PE, ethylene oxide and mono ethylene glycol
C3    Propylene    PP, acrylonitrile and propylene oxide
C4    Butadiene    Cis-1,4-polybutadiene rubber, styrene-butadiene rubber, SBC and acrylonitrile-butadiene rubber
    Isobutene    Butyl rubber and polyisobutylene
C5    Isoprene    Isoprene rubber, SIS and butyl rubber
    Dicyclopentadiene    Modified unsaturated polyester resin, petroleum resin and ethylene-propylene copolymers
    1,3-Pentadiene    Petroleum resin and curing agent
C6    Benzene    Styrene-butadiene rubber and  phenol/acetone
    Hexane    Solvents of cis-1,4-polybutadiene rubber (containing rare earths) and isoprene rubber
    Cyclohexane    Cyclohexanone and solvent for lithium polymer and
C8-C9    Toluene, p-xylene and  o-xylene    PTA, plasticizer and petroleum resin, etc.


2. China’s synthetic rubber sector depends on ethylene cracking, and will be affected greatly by the lightweight trend

In China, C4, C5 and C6 components – byproducts of ethylene production using naphtha and hydrocracking tail oil cracking – are mainly used to produce synthetic rubbers. The butadiene in C4 components is used to make cis-1,4-polybutadiene rubber, styrene-butadiene rubber and styrene block copolymer (SBC). The isobutene in C4 components is used to produce butyl rubber. The isoprene in C5 components is used for the production of isoprene rubber, styrene-isoprene-styrene block copolymer (SIS) and butyl rubber. The dicyclopentadiene in C5 components is used to produce modified unsaturated polyester resin and ethylene-propylene copolymers. The benzene extracted from C6 components can react with ethylene to make styrene, which is mainly used for the production of styrene-butadiene rubber and ABS. And the hexane in C6 components is mainly used to produce solvents that, in turn, are used to make cis-1,4-polybutadiene rubber, styrene-butadiene rubber and isoprene rubber.
Given China’s sources of raw materials, production processes and development trend, the outputs of butadiene, styrene and isoprene depend to different degrees on ethylene cracking units. As more benzene is obtained from coking, catalytic reforming and the disproportionation of toluene, styrene resources will rely less on ethylene cracking units. However, butadiene and isoprene will continue to depend heavily on ethylene cracking units. The following addresses the relationships of only butadiene and isoprene to ethylene cracking units.
2.1 Butadiene
At present, the main production processes of butadiene that have been industrialized are butane dehydrogenation, oxidative dehydrogenation of butylene and extraction of C4 components. The hottest new processes that are being developed are biological methods. Among the production processes mentioned above, due to the resource constraints, butane dehydrogenation is suitable for applications in the Middle East with its relatively rich resource of butane. The oxidative dehydrogenation of butylene features complex process, high consumption of energy and materials, and high production costs, and has industrial significance only when oil prices are high. Due to the constraints of butylene resources, production costs and the synthetic rubber market, it is difficult to popularize the oxidative dehydrogenation of butylene process. The biological methods use sugars, starch, wood fibers as raw materials. These raw materials are cheap and easily obtained, the production cost is low, and the production process is safe for workers and environmentally benign. However, because it is still in the laboratory research stage, biological methods are unlikely to be industrialized in the short term. According to the above analysis, for the time being, the extraction of C4 components is still the butadiene process of choice in China.
At present, China’s output of butadiene using C4 byproducts of ethylene cracking accounts for around 90% of the national total, while 82% of butadiene consumption is for the production of cis-1,4-polybutadiene rubber, styrene-butadiene rubber and SBC. These are China’s mainstream rubber varieties, and their combined capacity accounts for 83% of the nation’s total synthetic rubber capacity. The demand for butadiene in making these rubber varieties has increased constantly, promoting the utilization of butadiene and C4 components. Among the byproducts of ethylene cracking units, C4 components have achieved the best utilization and the highest added value.
In recent years, due to the increased proportion of lightweight raw materials in ethylene production, and the reduced proportion of naphtha, the output of C4 has tended to decline, resulting in a shortage and price rise for butadiene. The production cost of synthetic rubber has increased, and the output has fluctuated more than in past years, affecting the development of the synthetic rubber sector.
2.2 Isoprene
At present, C5 resources mainly come from ethylene cracking units, topped oil of pretreatment units in catalytic reforming unit and the gasses recovered from either oil fields or natural gas operations. Among the sources mentioned above, only C5 byproducts of ethylene cracking units are rich in isoprene and enable the production of isoprene rubber and butyl rubber. For a long time in the past, because China failed to industrialize isoprene rubber and butyl rubber, isoprene was mainly used here to produce SIS, and domestic demand for isoprene was relatively small. C5 byproducts of ethylene cracking were mainly used as fuel or to produce C5 mixed petroleum resin with low comprehensive utilization rate.
In recent years, due to the breakthrough development of butyl rubber and isoprene rubber in China, especially after isoprene rubber being included in the “encouraged” category of the Guiding Catalogue for Industrial Structure Adjustment (Version 2011) issued by the National Development and Reform Commission (NDRC), China has completed many units and put them into operation. The demand for isoprene has increased rapidly, so the development C5 separation technology and C5 separation units has blossomed. In major C5 components like isoprene, dicyclopentadiene and 1,3-pentadiene, isoprene is the component with the best utilization and the highest added value. Following C4 components, C5 components have become byproducts of ethylene cracking unit with higher comprehensive utilization rates.
With the capacity expansion of isoprene rubber and butyl rubber, the demand for isoprene will also increase. In order to diversify isoprene sources, players both at home and broad are actively developing new isoprene production technologies, among which the one-step process of making isoprene from isobutene and formaldehyde is the most promising. Because this technology has proved difficult to develop, in the near future, isoprene will still mainly come from C5 byproducts of ethylene cracking. As the use of lightweight ethylene raw materials grows, the isoprene supply will shrink while demand grows constantly, and there may be a similar problem for butadiene.
China is the major producer and consumer of automobiles and tires in the world, with large and rapidly growing capacity for making cis-1,4-polybutadiene rubber, styrene-butadiene rubber and isoprene rubber. China’s capacity to make acrylonitrile-butadiene rubber and rare earth cis-1,4-polybutadiene rubber grows constantly, and the demand for butadiene and isoprene increases concomitantly. Because butadiene and isoprene mainly come from ethylene cracking, until there is a fundamental change in their source, the impact of the transition to lightweight ethylene raw materials on the synthetic rubber sector should not be underestimated.

3. Lightweight ethylene raw materials jeopardize the sustainability of China’s synthetic rubber sector

China’s total capacity to make synthetic rubbers was 4.56 million t/a in 2012, accounting for 28.5% of the world total. Varieties include cis-1,4-polybutadiene rubber, styrene-butadiene rubber (mainly emulsion-polymerized styrene-butadiene rubber), butyl rubber, SBC, isoprene rubber, ethylene-propylene copolymers, acrylonitrile-butadiene rubber, etc. However, China’s synthetic rubber sector also faces the problems of overcapacity, low operating rate of the unit and an imbalance among the development of the various rubber varieties – especially cis-1,4-polybutadiene rubber, styrene-butadiene rubber and SBC, which are greatly influenced by the lightweight ethylene raw materials. Each of these three has a serious capacity surplus, all exceeding 30%. At present, China’s synthetic rubber sector faces a structural overcapacity; that is, the general-purpose rubber capacity is in surplus and the high performance rubber capacity is insufficient, directly affecting the sustainability of the synthetic rubber sector, contending with the market pressures on resources (mainly butadiene) as well as the impact of lightweight ethylene raw materials.

4. China’s synthetic rubber sector faces both opportunities and challenges, and can take many measures to cope with the impact of new ethylene raw materials

With the arrival of lightweight ethylene raw materials, China’s synthetic rubber sector faces not only increasing shortages of butadiene and isoprene, but also the constant increase of butadiene and isoprene demand caused by the overcapacity of cis-1,4-polybutadiene rubber, styrene-butadiene rubber and SBC. Solving these problems will determine the health and sustainability of China’s synthetic rubber sector. China’s synthetic rubber sector faces both opportunities and challenges, with some favorable conditions for accommodating the lightweight ethylene raw materials. Experts have put forward four kinds of suggestions to deal with the problems:
(1) China should make use of the opportunities and challenges from the implementation of EU (the European Union)’s tire labeling regulation to adjust the product portfolio of synthetic rubbers. EU’s tire labeling regulation, implemented initially in November 2012, has higher requirements on fuel efficiency, wet surface performance and rolling noise, and so far, only solution-polymerized styrene-butadiene rubber and rare earth cis-1,4-polybutadiene rubber tires can meet the requirements. EU is the second largest tire export destination of China. To maintain the competitiveness of Chinese tires in that region, China should adjust its car and truck tire designs, adopting cis-1,4-polybutadiene rubber and emulsion-polymerized styrene-butadiene rubber as the main raw materials. The Access Conditions for the Tire Sector that will soon be issued by the Ministry of Industry and Information Technology of China (MIIT) has taken the EU’s tire labeling regulation as reference and made clear requirements on green tires, product quality, and the consumption of energy and other resources in tire manufacture.
(2) China should make use of the change in market resources being brought about by the lightweight ethylene raw materials to form a competitive advantage and core competitiveness in high-end and high-quality synthetic rubbers, and improve the industry’s resource utilization. At present, the structural overcapacity of China’s synthetic rubber sector offers a possibility for better utilizing resources and for optimization in other areas. It is suggested that China make use of the limited butadiene and isoprene resources to develop rare earth cis-1,4-polybutadiene rubber, isoprene rubber, acrylonitrile-butadiene rubber and solution-polymerized styrene-butadiene rubber with high added value and large potential, on the basis of planning the existing resources and rubber varieties and according to the market demand situation. Further, industry leaders should trim the production scale for rubber varieties with overcapacity and low added value, such as cis-1,4-polybutadiene rubber, styrene-butadiene rubber and SBC, to allocate resources more reasonably and efficiently.
(3) China should solve the problems that exist in domestic solution-polymerized styrene-butadiene rubber and rare earth cis-1,4-polybutadiene rubber, and through improving the quality of domestic rubbers, cost-cutting and branding, develop market support for high-end and differentiated synthetic rubbers. At present, rubbers for domestic high-end tire production are mostly imported. China is the major producer and exporter of tires in the world, and after full implementation of the EU’s tire labeling regulation, the demand for rare earth cis-1,4-polybutadiene rubber and solution-polymerized styrene-butadiene rubber in tire sector will further increase. It is suggested that China should emphasize the role of the existing and new rare earth cis-1,4-polybutadiene rubber and solution-polymerized styrene-butadiene rubber units, reduce cost, stabilize quality and open up the market through technical research and market development, gradually increase the consumption and market share of domestic rubbers in China’s tire sector, and cultivate market support for high-end and differentiated synthetic rubbers.
(4) China should improve the development of laws and regulations, and reasonably regulate the market to provide a favorable environment for the development of the synthetic rubber sector. China's capacity to make synthetic rubbers ranks first in the world, and China’s synthetic rubber sector has formed a diversified industry pattern comprising state-owned, joint venture and private enterprises. However, in the development of the industry, China’s synthetic rubber sector lacks constraining rules like industry access conditions, and the industry management is relatively loose. It is suggested that the relevant departments of the state should introduce access conditions for the rubber sector as soon as possible, strengthen market supervision, restrain excess capacity and regulate the development of the sector through laws and regulations in aspects such as geographical layout, allocation of resources, supporting conditions, the scale of units and the consumption of energy and materials, and realize the sustainable development of the synthetic rubber sector.

5. Conclusion

The adoption of lightweight ethylene raw materials is the global development trend. It has positive and far-reaching effects on the ethylene industry, stimulating diversification of raw materials and bolstering sustainable development of China’s ethylene industry. With the transition to lightweight ethylene raw materials, butadiene and styrene output decreases, adversely impacting the synthetic rubber sector. China’s synthetic rubber sector should transform the impacts and challenges caused by the lightweight ethylene raw materials into development opportunities, and according to the actual situation of the sector and through adjusting the product portfolio and capacity, and upgrading technology, resolve the shortage of raw materials to promote the healthy and sustainable development of the sector.