Linear Alpha Olefins - A Complex Industry

The alpha olefins (“LAO”) business is very complex as major producers serve a broad range of chemical industry segments from polyethylene comonomers (C4-C8) to synthetic lubricants (C10) and detergent intermediates (C12-C14) to oilfield chemicals, paper sizing agents (C16-C18), lubricant additives (C20+), and wax rheological modifiers (C24+). In addition, there are a myriad of fine and performance chemical intermediates.

The alpha olefin business is complex from a production standpoint as well. Although certain alpha olefins can be produced on-purpose, much of the production takes place using ethylene oligomerisation and as such one plant will produce a distribution of products. These products supply a wide range of very different markets. Each market behaves differently in terms of:

Application/End-Use
Market Size
Growth
Customer Locations
Customer Size and Requirements
Supply Chain Characteristics.

This poses a number of challenges to linear alpha olefin (LAO) producers. The low carbon number components such as butene-1, hexene-1 and octene-1 are predominantly consumed in the production of polyethylene. Decene-1 is principally used to manufacture polyalpha olefins (PAOs) for the production of high performance lubricants. Higher alpha olefins in the C12-C14 range are consumed in the production of detergent alcohols for subsequent ethoxylation, sulfonation, etc. Certain fractions, namely hexadecene-1 (C16) and octadecene-1 (C18) are used predominantly in the oilfield chemicals sector and also in the paper industry for the production of certain sizing agents. Higher fractions, greater than eicosene (C20+), are used to manufacture various speciality chemicals, including lubricant additives and speciality waxes.

The alpha olefins producers therefore must service these very different industries, which have very different economic influences and demand drivers. At any one time in the economic cycle, demand across all fractions will fluctuate. Some fractions will be long, while others will be short. This presents an even greater challenge to alpha olefins producers.

The global demand for linear alpha olefins exceeded five million tons in 2017. Butene-1, which is sourced from both on-purpose production and full range LAO plants. LAO demand is focused on LLDPE, which dominates, accounting for 50 percent of total demand consuming butene-1, hexene-1 and octene-1. Higher linear alpha olefins (C8+) account for 28 percent of the market share and include the production of polybutene, lubricants, plasticisers, detergent alcohols, oil field chemicals, AOS additives, fine chemicals and other miscellaneous.

Butene-1 will remain the key growth driver in Asia Pacific, along with a focus on the production of commodity butene-1 polyethylene grades. However, the region will also support growth of heavier comonomers. The increased production of C6-LLDPE film in China is an example of such development. In the near term forecast, North America and Middle East demand will grow at above the global average. Activity in the Middle East remains focused on comonomers for polyethylene production, while North America will provide growth opportunities in higher alpha olefin fractions as well as comonomers for polyethylene production. In contrast, overall demand growth for linear alpha olefins in Western Europe will be below the global average, reflecting the ongoing pressure on polyethylene production in Western Europe.

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