U.S. toluene, mixed xylene, and paraxylene demands to see steady growth

Robin G. Harvan
Bonner & Moore Associates Inc.
Houston

Toluene and mixed xylene demands are subject to complex factors, according to forecasts by Bonner & Moore Associates Inc. (BMAI). Toluene demand is expected to increase at an annual rate of 1.5% from 1995 to 2015, while mixed xylenes and paraxylene demand will increase at an annual rate of 2.0% and 3.2%, respectively, during the same period.

Paraxylene is produced by isomerizing mixed xylenes, which are obtained primarily from refinery reformate streams with lesser volumes derived from pyrolysis gasoline and disproportionation of toluene.

Although some 70% of mixed xylenes are isomerized to make paraxylene, about 15-20% of mixed xylenes are blended into gasoline to increase octane levels in those markets where lead is prohibited. Because of this, the availability and cost of paraxylene are linked not only to its derivative markets, but to local, regional, and worldwide gasoline markets.

The growth in gasoline demand, however, does not mean an increased demand for mixed xylenes from the gasoline pool. Although the global gasoline market is moving away from lead, concerns about the carcinogenic effects of high-octane aromatics have led to mandates on maximum aromatics content in gasoline. The trend to limit aromatics, which started in the U.S., is spreading.

As a result of regulations to limit aromatics in gasoline, refiners will adjust their processes to restrict aromatics in gasoline. Lower returns on aromatics may prompt producers to shut down units, which can create an artificial shortage. The threat of lower availability and sharply higher mixed-xylene/paraxylene prices is of concern.

Over the past 3 years, production of paraxylene directly from disproportionation of toluene has been increasing. This new source of paraxylene takes advantage of projected excess volumes of toluene, derived from limitation of its use in gasoline and from decreased demand of toluene hydrodealkylation (HDA) to benzene.

Toluene supply and demand

The forecast for U.S. demand growth for toluene is at an annual rate of 1.5% between 1995 and 2015, from 1,338 million gal to 1,784 million gal ( Fig. 1 [59,055 bytes]). Growth in 1995-2005 is expected to be 1.3%, while growth in 2005-2015 is estimated to be slightly higher, 1.6% annually.

U.S. toluene demand consists of both domestic U.S. demand and exports from the U.S. Domestic demand for toluene should slow after 2005 from an annual growth rate of 2.6% to just 2.2%. The steady increase in demand is driven by an anticipated slower rate of fall in export volumes. The top series in each bar in Fig. 2 [56,323 bytes] represents the nondomestic demand.

This slowdown in the demand growth rate reflects the maturity of the various end-use markets for toluene. At the same time, BMAI sees no new toluene capacity being constructed, a conclusion supported by the fact that little increased refining capacity is expected in the U.S.

BMAI expects a recessionary period to occur in the 1998-1999 timeframe. Although overall demand rate will slow during this period, demand will still exhibit a net increase in each successive year. BMAI bases this somewhat optimistic outlook on the fact that the U.S. petrochemical industry is beginning to show the ability to compensate for economic downturns by carrying less on-hand inventory. By keeping stocks low, demand will have to be met out of production.

Fig. 2 shows the demand for end-uses of toluene.

The use of toluene for hydrodealkylation (HDA) to benzene will remain the largest end-use market. Demand for this market is rising 1.4%/year from 1995 to 2005, with growth slowing thereafter to just 0.7%/year in the 2005-2015 timeframe. The slowing demand for benzene and the low profitability of HDA operations limit potential growth.

Use of toluene as an octane blendstock should grow from 198 million gal in 1995 to 227 million gal in 2005, a 1.4% annual increase. Projected demand of toluene as an octane feedstock should rise from 227 million gal in 2005 to 249 million gal in 2015, a 0.09% growth rate. This rate is slightly below that of overall gasoline demand, which is 1-2%.

This forecast of weak demand is based upon the anticipation of additional restrictions on aromatics content in gasoline to be implemented after 2000, which should further limit aromatics volumes which can be used.

Toluene use as a solvent totaled some 205 million gal in 1995. By 2005, toluene end-use as a solvent should be 266 million gal, an annual rise in demand of 2.6%. With resistance to the use of aromatics-based solvents growing, a combination of public pressure and government mandates will result in slower growth in this sector. BMAI expects toluene use in solvents to grow at a 1.9% annual rate from 2005 to 2015 to 320 million gal.

By any standards, the growth in use of toluene in xylenes manufacture-particularly toluene disproportionation (TDP) to paraxylene-is robust. After consuming 134 million gal in 1995, TDP use of toluene should grow 6.9%/year to 262 million gal in 2005. Growth thereafter is expected to be constrained by paraxylene demand. Still, BMAI expects use of toluene to exhibit strong growth (5.7%/year) between 2005 and 2015, when some 459 million gal should be used to make paraxylene.

While exports will continue to shrink from a 1995 volume of 348 million gal, a recovery in the 2000-2007 timeframe will slow the rate of fall. This recovery reflects the increased need for octane blendstock for unleaded gasoline as well as a surge in demand from toluene disproportionation units that are expected to be constructed in Asia/Pacific during this time.

From 2007 to 2015, the construction of regional refining and petrochemical facilities make a decline in export volumes certain.

As shown in Fig. 1, there will be ample capacity to meet the demand forecast without additional capacity. No expected significant increase in U.S. refining capacity combined with rising demand for TDP will encourage rising operating rates. Although operating rates will rise throughout the forecast period, supply/demand fundamentals will not provide any upward pressure on toluene prices.

Mixed xylene supply/demand

U.S. demand for mixed xylenes is predicted to grow at an annual rate of 2.0% between 1995 and 2015, from 981 million gal to 1,431 million gal ( Fig. 3 [59,034 bytes]). Annual growth in the 1995-2005 timeframe will be 3.0%, while growth between 2005 and 2015 will be sharply lower at 0.9%.

This weak annual growth profile is due to anticipated slowing of exports after 2005, as local production reduces the need for imported mixed xylenes. Domestic demand will increase more consistently; growing 2.3% annually from 1995 to 2005, then at an annual rate of 2.0% from 2005 to 2015. Fig. 4 [53,917 bytes] shows the outlook for domestic and export demand.

BMAI expects a net drop in overall demand during forecasted recessionary 1998-1999 and 2006-2007 timeframes.

Like toluene, the slowdown in the rate of demand growth reflects the maturity of the various end-use markets for mixed xylenes. Again, consistent with no significant new U.S. refinery construction expected, no new mixed xylenes capacity is expected.

Regarding markets, the use of mixed xylenes for isomerization to paraxylene will remain the largest end-use market. Demand is rising 4.2%/year from 194 million gal in 1995 to 292 million gal in 2005. BMAI predicts that growth in demand will slow to 3.0% in the 2005-2015 time period, with paraxylene production (from mixed xylenes) amounting to 390 million gal in 2015.

Growth during both periods would be higher were it not for the increasing use of toluene disproportionation.

Use of mixed xylenes as an octane blendstock should grow from 207 million gal in 1995 to 244 million gal in 2005, a 1.7% annual increase. The next 10 years of the forecast shows mixed xylenes use in gasoline edging higher, at an annual rate similar to that of overall gasoline demand, 1.4%.

This forecast is based on the anticipation of additional restrictions on aromatics content in gasoline to be implemented after 2000, which should further limit aromatics volumes which can be used. At the same time, BMAI thinks that mixed xylenes will be of relatively lower cost than toluene later in the forecast period. Demand for mixed xylenes as an octane blendstock is projected to rise as a replacement for toluene-to 281 million gal in 2015.

Mixed xylenes use as a solvent totaled about 283 million gal in 1995. By 2005, mixed xylenes for this end-use should be 320 million gal, an annual rise in demand of 1.2%. The forecast for mixed xylenes use in solvents is 1.1% annual growth rate to 358 million gal in 2015.

Although exports are expected to grow from a 1995 volume of 230 million gal to 375 million gal in 2002-2005, volumes will decline thereafter as the construction of regional refining and petrochemical facilities offset the need for additional export volumes.

Similar to toluene, mixed xylenes will have ample capacity to meet demand without additional capacity (Fig. 3). Again, while operating rates will rise throughout the forecast period, supply/demand fundamentals will not provide any upward pressure on mixed xylenes prices.

Paraxylene supply/demand

U.S. demand for paraxylene ( Fig. 5 [56,150 bytes]) is growing at an annual rate of 3.2% between 1995 and 2015, from 7.1 billion lb to 13.4 billion lb. Growth in the 1995 to 2005 timeframe will be 3.6%, while growth between 2005 and 2015 will be lower, at 2.8% annually.

Domestic paraxylene demand (Fig. 6 [48,266 bytes]) should grow 4.1% annually from 6.3 billion lb in 1995 to 9.3 billion lb in 2005. Over the following 10 years, paraxylene demand should rise 3.1%/year, reaching 12.7 billion lb in 2015. There is only one use for paraxylene, the manufacture of purified terephthalic acid (TPA) and its derivative, dimethyl terephthalate (DMT). Both are used solely for polyester (polyethylene terephthalate, PET) manufacture. The production of solid-state PET is a larger portion of consumption in the U.S. than anywhere else in the world. And while solid-state PET demand will grow worldwide, melt-phase production should remain the major end-use throughout the forecast period.

Table 1 presents current operating or planned paraxylene capacity in the United States. Although no new capacity is currently scheduled after 2000, BMAI anticipates the addition of capacity between 2000 and 2015.

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