London, 23 October (Argus) — The closure of UK private-sector firm Ineos' 2mn t/yr petrochemical complex at Grangemouth in Scotland will have limited impact on the already over-supplied UK and European ethylene market. But the closure, confirmed earlier today by Ineos is likely to hit co-cracker product prices such as propylene and butadiene.
Petrochemical production at Grangemouth has traditionally revolved around two crackers – KG and G4. KG is a mixed propane and ethane gas feed cracker with 740,000 t/yr of ethylene capacity and 220,000 t/yr of propylene. G4 is the second and smaller naphtha cracker with 335,000 t/yr of ethylene capacity and 180,000 t/yr of propylene.
The two crackers had already been operating at well below target production rates because of falling ethylene demand in the UK and Europe. Since the economic crisis of 2008, ethylene producers in Europe have been increasingly reliant on the export market for sales.
But isolated crackers such as those at Grangemouth have struggled most because of its unattractive location for export. The KG plant had been running at about 50pc of capacity as a result of a shortage of gas feedstock while the G4 cracker — which was already destined to close by the end of 2014 — was running at a reduced rate as costs associated with naphtha cracking were high.
The Grangemouth complex is also home to a 320,000 t/yr linear low density polyethylene plant (LLDPE) and high-density polyethylene (HDPE) swing unit, a 270,000 t/yr polypropylene (PP) plant and a 70,000 t/yr butadiene plant.
As the UK ethylene market is currently over-supplied, Grangemouth customers are expected to be adequately supplied with ethylene feedstock from the Sabic cracker at Wilton or the ExxonMobil/Shell cracker at Mossmorran. But loss of related downstream production units will limit the supply of co-cracker products and force price increases through for polymers and butadiene customers.
While the closure of propylene production at Grangemouth will be partially matched by the demand lost from the adjacent polypropylene unit, the butadiene closure will impact a market which is slowly returning to tightness after a period of length.
The loss of the LLDPE-HDPE swing unit and the PP unit will be covered by excess capacity elsewhere. But in the case of LLDPE, Europe has become more reliant on imports from the Middle East and may need to compete with the Asian export market in order to secure supply.
The 250,000 t/yr benzene extraction unit at Grangemouth was already destined to close by the end of 2013 in anticipation of the G4 cracker closure next year.
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