How methanol to olefins technology could improve price stability in resin markets.
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Methanol to olefins (MTO) is a recent technology that converts methanol into high-value petrochemicals, including plastics like polyethylene.
Manufacturers who use moldable commodity resins like ethylene and propylene (the precursors to polyethylene and polypropylene) face a dual challenge. Plastic resin raw material is frequently the biggest single cost in an injection molded or extruded product. Ever wonder why low-cost plastic outdoor furniture breaks so easily and fades in sunlight? That’s because the resin is extended with fillers like kaolin clay and lacks expensive UV light stabilizers.
In a highly price-competitive consumer goods market, any strategy that lowers raw material pricing flows straight to the bottom line.
Manufacturers also find issues in price stability. The critical precursors to commodity thermoplastics, ethylene and propylene are cracked in processes similar to the refining of oil into motor fuels. Like fuel, their pricing tracks oil pricing closely.
Honeywell UOP recently licensed their MTO technology to China’s Better Clean Energy, following the successful startup of a commercial scale MTO facility in China in September 2013. That unit has met all performance objectives, producing more than 360,000,000 pounds of ethylene and propylene.
What the Honeywell system offers Chinese manufacturers is the ability to partially disconnect raw material input costs from global oil pricing. With the ability to use alternate feedstocks like natural gas or even low-grade coal, Chinese resin suppliers will not only have access to plentiful, cost competitive raw materials, but will also be able to locate them away from the traditional petroleum infrastructure. It won’t strictly be necessary to build the plastics plant near a seaport or major pipeline link for example.
There are environmental benefits too. As greenhouse gas target compliance moves forward, the switch away from coal in electric power generation will continue. This will likely result in a surplus of low-grade coal, with no clear market for it outside of conversion to higher value hydrocarbons. An alternate market for that coal could go a long way toward removing coal industry lobbying efforts, to frustrate or delay the switch to cleaner sources of electricity.
Better Clean Energy will use Honeywell UOP’s Advanced MTO process to produce 300,000 metric tons of ethylene and propylene per year at its new facility in Shandong province in Eastern China. The facility is expected to start up in 2016.
Jiangsu Sailboat Petrochemical Co. Ltd. also is building what is expected to be the largest single-train MTO unit in the world, producing 833,000 metric tons of ethylene and propylene per year.
If this technology spreads globally, we’re looking at important constraints on price increases for commodity resins and more importantly, improved price stability in resin markets for manufacturers.