Slower Growth Forecast for PAO Lubes
By Lisa Tocci
After 18 months of weak demand and dismal pricing in many segments, the market for alphaolefins is beginning to pick up, says Marilyn Bradshaw, vice president and alphaolefins project leader at the consulting firm Colin A. Houston and Associates in Brewster, N.Y.
Sales of polyalphaolefins for synthetic lubricants will pick up, too, she told Lube Report, but growth will be less than half of that seen in the 1990s.
"The PAO market saw incredible growth -- more than 12 to 15 percent per year -- in the 1990s," she added. "Decene-1 producers couldn't make it fast enough. But next year and into the future we're forecasting 4.5 to 5 percent growth. That's really decent growth, of course. However, we aren't going to see alphaolefin producers running at capacity, at the 90-plus-percent rates as they saw before, until the much larger economy rebounds."
Polyethylene comonomers -- carbon chain lengths 4, 6 and 8 -- represent the biggest end-use of alphaolefins, Bradshaw explained. The second-largest is to make PAO, typically based on the C10 molecule (decene-1). Eighty-five percent of decene-1 is consumed in making synthetic lubricants.
Mark Pernik, global business manager, polyalphaolefins, at Chevron Phillips Chemical in Houston, also sees slowing growth for decene-1. Besides the general economic torpor, he said displacement of PAOs with Group III mineral base oils is the principal cause for the slowdown.
Pernik suggested, however, that GF-4 passenger car engine oils (expected next year) may offer an opening for PAOs to reclaim a share of this market. "Any time specifications change and become more stringent, it's good for PAOs," he said. "The displacement of PAOs with Group III base oils in the crankcase engine oil market did happen over the past few years; luckily, other markets like compressor oils and other industrial lubes did not move away from PAOs en-masse that way.
"So now, looking at crankcase oils from the outside, we can look at GF-4 more opportunistically. We can see where GF-4 oils' need for better oxidative stability might favor PAOs, even versus Group III and other very high viscosity index mineral base oils. It's too early to say, but as we go on to GF-4, GF-5 and higher specifications, the technical needs are going to become more difficult."
In January, Chemical Market Reporter projected a rosy 10 percent growth rate for PAOs in synthetic lubes, but Pernik feels that's "a bit overaggressive." He expects demand for synthetic lubes based on PAO will grow "in single digits, from 3 to 5 percent a year globally."
There are eight significant alphaolefin producers worldwide -- and they're getting bigger, noted Colin Houston's recent 700-page multiclient study, "Alpha-Olefins: World Markets 2000-2010." In North America alone, Chevron Phillips Chemical brought a new 340,000 ton/year plant on stream in Texas in 2000; BP started up its 250,000 t/y plant in Alberta, Canada, in mid-2001, and Shell is planning to begin commercial production at a new 318,000 t/y plant in Louisiana in the second quarter of this year. Other planned alphaolefin capacity additions include:
1) Three new units under consideration by South Africa's Sasol;
2) A 47,000 t/y hexene-1 plant in Qatar opening in first-quarter 2003; it will be operated by Q-Chem, a joint venture of Chevron Phillips and Qatar General Petroleum Co.
3) SABIC's 150,000 t/y plant at Al-Jubail, Saudi Arabia, expected by 2004.
4) Finally, Chevron Phillips Chemical is undertaking an expansion/debottlenecking at Cedar Bayou, Texas, to boost annual capacity there another 100,000 tons next year.
In all, alphaolefin capacity will climb from 2.6 million tons/year at the end of 1999 to 3.5 million by the end of 2002, and could hit 4.2 million t/y by 2005. This means a large volume of decene-1 molecules will be looking for a home -- so Pernik is looking hard for applications beyond lubricants.
"PAO lubricants are still growing, but we're also moving some decene into markets where the growth is lower, such as alcohols and linear alkylbenzenes," he said. "We expect to see other new uses in the next five to six years, as well."
Colin Houston's Bradshaw also sees producers trying to explore wider markets for decene, now that lubricants have fallen off. "For example, some C10 is being used with C6 and C8 and converted to alcohols to make plasticizers," she said. "There's a very small market, too, for an extremely high-purity PAO that's used as an emolient in cosmetics. And some little bits of decene find their way into epoxides and petroleum additives, or linear alkylbenzene."
Price is a key issue, of course. Despite being elbowed out of lubricants by Group III base oils, PAO producers are "very reluctant to lower prices," Bradshaw said. "They're not convinced that they'll gain significant volumes by lowering prices. On the other hand the market's two biggest players -- Chevron Phillips and BP -- are integrated producers who both expanded alphaolefins capacity recently and will want to keep it running."
Pernik acknowledged that supply-and-demand fundamentals may create some downward pressure on PAO prices. As additional decene-1 molecules come on the market, there could be some imbalances so prices might fluctuate. Even so, he emphasized, "PAOs will never have a cost advantage over Group III mineral oils, because they are more expensive to make. The technology, the processes and the feedstock don't favor PAOs to have a low-cost position. So people will only use PAO if there is a technical driver to use it. And as specifications improve, we will see those technical drivers emerge."
"I think it will be interesting to see if they'd go head-to-head with Group III," Bradshaw mused. "Inevitably, the price may have to come down. Throughout the 1990s, there was such strong demand for PAOs that decene producers were able to sell every pound they made. But PAO now is facing a competitive challenge from Group III base oils and will grow only half as fast as it did in the 1990s. So the decene market may be out of balance for a while."
For information about the Colin A. Houston and Associates study on alphaolefins, phone (845) 279-7891. E-mail: [email protected]
By Lisa Tocci
After 18 months of weak demand and dismal pricing in many segments, the market for alphaolefins is beginning to pick up, says Marilyn Bradshaw, vice president and alphaolefins project leader at the consulting firm Colin A. Houston and Associates in Brewster, N.Y.
Sales of polyalphaolefins for synthetic lubricants will pick up, too, she told Lube Report, but growth will be less than half of that seen in the 1990s.
"The PAO market saw incredible growth -- more than 12 to 15 percent per year -- in the 1990s," she added. "Decene-1 producers couldn't make it fast enough. But next year and into the future we're forecasting 4.5 to 5 percent growth. That's really decent growth, of course. However, we aren't going to see alphaolefin producers running at capacity, at the 90-plus-percent rates as they saw before, until the much larger economy rebounds."
Polyethylene comonomers -- carbon chain lengths 4, 6 and 8 -- represent the biggest end-use of alphaolefins, Bradshaw explained. The second-largest is to make PAO, typically based on the C10 molecule (decene-1). Eighty-five percent of decene-1 is consumed in making synthetic lubricants.
Mark Pernik, global business manager, polyalphaolefins, at Chevron Phillips Chemical in Houston, also sees slowing growth for decene-1. Besides the general economic torpor, he said displacement of PAOs with Group III mineral base oils is the principal cause for the slowdown.
Pernik suggested, however, that GF-4 passenger car engine oils (expected next year) may offer an opening for PAOs to reclaim a share of this market. "Any time specifications change and become more stringent, it's good for PAOs," he said. "The displacement of PAOs with Group III base oils in the crankcase engine oil market did happen over the past few years; luckily, other markets like compressor oils and other industrial lubes did not move away from PAOs en-masse that way.
"So now, looking at crankcase oils from the outside, we can look at GF-4 more opportunistically. We can see where GF-4 oils' need for better oxidative stability might favor PAOs, even versus Group III and other very high viscosity index mineral base oils. It's too early to say, but as we go on to GF-4, GF-5 and higher specifications, the technical needs are going to become more difficult."
In January, Chemical Market Reporter projected a rosy 10 percent growth rate for PAOs in synthetic lubes, but Pernik feels that's "a bit overaggressive." He expects demand for synthetic lubes based on PAO will grow "in single digits, from 3 to 5 percent a year globally."
There are eight significant alphaolefin producers worldwide -- and they're getting bigger, noted Colin Houston's recent 700-page multiclient study, "Alpha-Olefins: World Markets 2000-2010." In North America alone, Chevron Phillips Chemical brought a new 340,000 ton/year plant on stream in Texas in 2000; BP started up its 250,000 t/y plant in Alberta, Canada, in mid-2001, and Shell is planning to begin commercial production at a new 318,000 t/y plant in Louisiana in the second quarter of this year. Other planned alphaolefin capacity additions include:
1) Three new units under consideration by South Africa's Sasol;
2) A 47,000 t/y hexene-1 plant in Qatar opening in first-quarter 2003; it will be operated by Q-Chem, a joint venture of Chevron Phillips and Qatar General Petroleum Co.
3) SABIC's 150,000 t/y plant at Al-Jubail, Saudi Arabia, expected by 2004.
4) Finally, Chevron Phillips Chemical is undertaking an expansion/debottlenecking at Cedar Bayou, Texas, to boost annual capacity there another 100,000 tons next year.
In all, alphaolefin capacity will climb from 2.6 million tons/year at the end of 1999 to 3.5 million by the end of 2002, and could hit 4.2 million t/y by 2005. This means a large volume of decene-1 molecules will be looking for a home -- so Pernik is looking hard for applications beyond lubricants.
"PAO lubricants are still growing, but we're also moving some decene into markets where the growth is lower, such as alcohols and linear alkylbenzenes," he said. "We expect to see other new uses in the next five to six years, as well."
Colin Houston's Bradshaw also sees producers trying to explore wider markets for decene, now that lubricants have fallen off. "For example, some C10 is being used with C6 and C8 and converted to alcohols to make plasticizers," she said. "There's a very small market, too, for an extremely high-purity PAO that's used as an emolient in cosmetics. And some little bits of decene find their way into epoxides and petroleum additives, or linear alkylbenzene."
Price is a key issue, of course. Despite being elbowed out of lubricants by Group III base oils, PAO producers are "very reluctant to lower prices," Bradshaw said. "They're not convinced that they'll gain significant volumes by lowering prices. On the other hand the market's two biggest players -- Chevron Phillips and BP -- are integrated producers who both expanded alphaolefins capacity recently and will want to keep it running."
Pernik acknowledged that supply-and-demand fundamentals may create some downward pressure on PAO prices. As additional decene-1 molecules come on the market, there could be some imbalances so prices might fluctuate. Even so, he emphasized, "PAOs will never have a cost advantage over Group III mineral oils, because they are more expensive to make. The technology, the processes and the feedstock don't favor PAOs to have a low-cost position. So people will only use PAO if there is a technical driver to use it. And as specifications improve, we will see those technical drivers emerge."
"I think it will be interesting to see if they'd go head-to-head with Group III," Bradshaw mused. "Inevitably, the price may have to come down. Throughout the 1990s, there was such strong demand for PAOs that decene producers were able to sell every pound they made. But PAO now is facing a competitive challenge from Group III base oils and will grow only half as fast as it did in the 1990s. So the decene market may be out of balance for a while."
For information about the Colin A. Houston and Associates study on alphaolefins, phone (845) 279-7891. E-mail: [email protected]
