The Corrosion Chronicle Spring 2015 In this issue Derakane 470 Resin in China Composite Pedestrian Bridge Placed in Russia Design Engineers Depend on FRP for Corrosion Challenges in Chemical Processing According to the American Chemical Council (ACC) the chemical industry in the United States is an $812 billion enterprise. It has become a key driver for the American economy as chemicals account for over 12% of all US exports and 15% of the world s chemicals. The ACC estimates that more than 96% of all manufactured goods in the world today are touched by products of chemistry. The American chemical industry has been largely flat or declining over the last several decades as manufacturers moved their production assets offshore chasing lower cost petrochemical raw materials in the Mid East or rapidly rising demand in Asia. Chemical production growth stood at a mere 0.1% in 2012, 1.3% in 2013 and 2.0% in 2014. With the advent of low cost shale gas, however, that trend has reversed itself. Forecasters now believe that chemical output in the US will rise 3.7% in 2015 and continue to rise for some time to come. US chemical production volumes are now growing faster than GDP (see Figure 1). Where you can see the Ashland corrosion team NACE Corrosion Dallas, TX Mar 15-19, 2015 COM 2015 Toronto, Ontario Aug 23-26, 2015 China Composites Expo Shanghai, PR China Sept 2-4, 2015 Composites Europe Stuttgart, Germany Sep 22-24, 2015 WEFTEC Chicago, IL Sept 26-30, 2015 CAMX Orlando, FL Oct 26-29, 2015 continued on page 2 With good chemistry great things happen.
Design Engineers continued Figure 1 next year. The immediate impact of the steep drop in crude pricing is being seen in drilling operations. Rig counts are off significantly and many of the American drilling companies have announced substantial layoffs. Outside of drilling fluids and proppants, however, this is not expected to affect the US chemical industry significantly in the short term. Conversely, consumers are elated at the new lower prices at the gas pump which fell by an average of $1.25 / gallon in the second half of 2014. Most economists expect that US consumers will plow much of those fuel savings back into the economy, thus offsetting the macroeconomic impact of reduced spending in the oil and gas market. Figure 3 Source: http://www.emmachemicals.com/press-releases/july-chemical-news/ Low cost shale gas provides the US chemical industry with a strong competitive advantage for both chemical feedstocks and energy. Indeed, up until the recent freefall in crude oil prices, North American petrochemical producers enjoyed a 50-60% cost advantage over their competitors in Western Europe and Asia. U.S. Chemical Industry Global Cost Advantage Relative Position of U.S. (2005-2013) (Petrochemical Figure 2: Relative Production Position of Costs) U.S. (2005-2013) (Petrochemical Production Costs) HIGH 2012 PRODUCTION COSTS Estimated * ($/lb.) LOW MIDDLE EAST UNITED STATES IN 2013 CHINA WESTERN EUROPE GLOBAL SUPPLY (billion lbs.) OTHER NORTHEAST ASIA RELATIVE POSITION OF UNITED STATES IN 2005 *Based on estimates from best available data Source: http://www.americanchemistry.com/policy/energy/shale-gas/slides- US-Chemical-Investment-Linked-to-Shale-Gas-Reaches-125-Billion.pdf Source: http://www.nytimes.com/2015/01/13/business/energy-environment/ oil-prices.html?_r=1 Kevin Swift, chief economist for the ACC believes that the US will keep its market advantage as long as Brent crude stays above $28/ bbl and Henry Hub gas prices stay below $4/MMBtu. It is at that point that Naptha becomes competitive with natural gas as a feedstock for petrochemical production. The US also commands considerably stronger overall demand for chemicals than most other parts of the globe. Europe is still fighting to emerge from the recession and China is no longer applying the heavy government stimulus to its economy that it once was. Figure 4 Much of this advantage was compromised by the huge drop in crude oil pricing last December. Both West Texas Intermediate (WTI) and Brent crude oil prices have fallen more than 50% from their mid-2014 highs to less than $50 / bbl more recently. The US Energy Information Administration (EIA) forecasted in its January 2015 Short Term Energy Outlook (STEO) that WTI prices will average just over $54/bbl this year and about $71/bbl in 2016. IHS Chemical Week pegs the price of benchmark Brent crude to average $64/bbl in 2015 and $75/bbl Source: http://www.icis.com/resources/news/2015/01/19/9853402/commentaryoil-roils-us-cracker-project-outlook/ 2 Corrosion Chronicle
The strongest impact of low cost shale gas and natural gas liquids (NGL s) is on the production of basic feedstocks such as ethylene, propylene, methanol and ammonia. Petrochemical manufacturers have announced the construction of at least a dozen new crackers in the States. ICIS estimates that US ethylene capacity will increase 60% or nearly 17 MM Mt/yr when these new crackers come on line. Six of the twelve are already under construction. It is further anticipated that the glut of low cost chemical feedstocks into the US market will promote a similar renaissance in chemical derivatives and specialties. The States are also seeing a significant wave of foreign investment in their chemical industry. Industrial Information Research (IIR) is forecasting $130B worth of foreign investment over the next 12 years with peak investments occurring in 2016/2017. Strong growth is also anticipated by the ACC in US inorganic and organic chemicals, plastics and synthetic rubber. On top of that, improving demand in the light vehicle segment (up 3%) and housing starts (up 17%) this year will further drive production of specialty chemicals. The ACC reports that each home start consumes over $15,000 in chemicals and light vehicles consume another $3,550. Additionally, the Ag chemicals market is expected to be strong in 2015 and beyond. On balance, the American chemical industry is forecasted to post a trade surplus in 2015 and grow to $77 billion by the year 2019 (excluding pharmaceuticals). Figure 5 related capital expenditures has already been spent. The remaining $66.0 billion in spending will occur between 2013 and 2020.The scheduled start- up dates of announced projects indicate that capital spending will peak at $14.6 billion (in 2012 dollars) in 2015 as seen in Figure 13. It will then taper off as many of the announced projects seem to be centered with 2016 or 2017 start- up dates. Figure 6: Incremental Shale-related U.S. Chemical Industry Capital Expenditures Through 2019 FIGURE 13 INCREMENTAL SHALE- RELATED US CHEMICAL INDUSTRY CAPITAL EXPENDITURES THROUGH 2020 Billions of 2012 Dollars $16 $14 $12 $10 $8 $6 $4 $2 $0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Source: http://chemistrytoenergy.com/sites/chemistrytoenergy.com/files/shalegas-full-study.pdf 23 US Chemical industry capital spending rose almost 12% in 2014 to more than $33 billion. Capital spending is expected to continue to grow at a level of 9% annually through 2017 and ultimately reach $50 billion by 2019. And that spending goes beyond just crackers and ammonia plants. IIR is following more than $34 billion in chemical processing projects this year; up from about $24 billion in 2014. These projects run the gamut from petrochemicals to specialties. Figure 7: North American CPI Projects by Sector Source: http://www.chemicalprocessing.com/articles/2014/u-s-chemicalindustry-rebounds-/?start=1 Over the last three years the American chemical industry has announced more than 200 new capital projects related to the abundance of shale gas and NGL s with a total investment value exceeding $135B. Certainly, these projects include the previously discussed crackers, but they also include new plants and expansions in the area of ethylene and propylene derivatives, ammonia, methanol and other basic chemical feedstocks. Rank CPI Segments 2014 Actual TIV ($ Millions) 2015 Probable TIV ($ Millions) Variance 1 Petrochemicals $12,101 $18,805 $6,704 2 Ag Chemicals $4,291 $7,346 $3,055 3 Plastics/Rubbers $4,041 $3,513 ($528) 4 Specialty Chemicals $1,316 $1,765 $449 5 Other $730 $1,719 $989 6 Industrial Gases $858 $412 ($445) 7 Surfactants $240 $233 ($7) 8 Pigments $50 $164 $114 9 Fibers $14 $100 $86 10 Chlor-Alkali $254 $33 ($221) Total $23,895 $34,090 $10,196 $ in millions; capital and maintenance projects Source: Industrial Information Research Spring 2015 3
This all constitutes a potential windfall for the US fiber reinforced plastics (FRP) industry. Chemical producers handle a wide variety of acids, alkali, halogens and other compounds that are very corrosive to metal substrates. Design engineers are seriously challenged to find materials of construction for storage tanks, processing vessels, piping, ducts, pumps and scrubbers that can stand up to these demanding chemical processing environments. FRP based upon epoxy vinyl ester resins stands up to that challenge quite nicely and at a fraction of the cost of corrosion resistant stainless steel alloys or titanium. In 2014, Lucintel estimated that the US composite market grew by 6.3% reaching a volume of 5.5 billion pounds and surpassing a value of $8 billion. They project that the Market for FRP in America will grow another 5% in 2015, reaching nearly 6 billion lbs in annual shipments. By 2020 they forecast that the US composites market will reach $12 billion driven by a compounded annual growth rate of 6.6%. In their analysis, the pipe and tank market was one of three key growth drivers (along with transportation and construction). Volume in this segment grew at more than 5% in 2014 and is forecasted to grow by nearly 4% through 2020. Corrosion resistant FRP resins were first invented by American chemical companies searching for more chemically resistant materials of construction to stand up to their aggressive chemical processes. Hooker Chemical invented chlorendic polyester resins which they successfully applied in their chlor alkali production units. Later Dow Chemical developed Derakane epoxy vinyl ester resins which they employed not only in the production of chlorine and caustic, but in a myriad of additional chemical processes where metal alloys were found to be insufficient to the task. Both polymer chemistries are now produced and marketed by Ashland Performance Materials. Hetron chlorendic resin are still used today, more than 60 years later in chlor alkali systems and Derakane resins are celebrating their 50 anniversary this year. Not only is FRP well suited for service in aggressive chemical environments, but it is also considerably more economical than rubber lined steel or high nickel alloys. As a $6 billion international specialty chemical company Ashland Inc purchases a wide variety of chemical processing equipment around the world for its many chemical production sites. Ashland Engineering recently conducted a study to determine the relative cost of common (6000 gal) storage vessels fabricated with various materials of construction. The results are shown below: Figure 8: Storage Tank Cost Comparison $160,000 $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 C/S 304L SS FRP 316 SS 2205 SS C22 C276 Source: Ashland Engineering 2013 The Ashland EU Corrosion Team prepares to celebrate the 50th anniversary of Derakane resins at JEC 4 Corrosion Chronicle
Owens Corning saves $2 MM with FRP vessels vs Stainless Steel If carbon steel is suitable for a given chemical storage environment, clearly it is the most economical choice. When higher nickel alloys are required for more corrosive environments, however, FRP becomes a strong contender relative to 304 or 316 stainless steel and considerably better than Duplex 2205. If the chemical environment necessitates the use of Hastelloy or titanium, GRP is a considerably more economical choice. Owens Corning (OC) demonstrated the significant savings that FRP can provide a chemical manufacturer in a recent capital project conducted at their facilities. Between July 2010 and February 2011, OC purchased 85 storage vessels ranging in size from 350 40,000 gallons. All told, the savings over similar tanks fabricated with stainless steel were about $2 million. All of the vessels were made with Derakane epoxy vinyl ester resin and Advantex E-CR glass fiber reinforcements. In summary, the US chemical processing industry is anticipated to be a high growth market throughout the current decade and beyond, largely driven by low cost shale gas economics and recovering demand in a variety of key American markets. Although supply side economics may be tempered by the recent free fall in global crude pricing, American chemical manufacturers are expected to retain a sizeable raw material input cost advantage over their European and Asian competitors. This enviable business climate is creating a large opportunity for US composite fabricators to participate in the chemical manufacturing renaissance with material science technologies that are ideally suited for chemical processing applications. For further information on opportunities in the chemical processing for corrosion resistant FRP, please contact Thom Johnson at Ashland Performance Materials (tljohnson@ashland.com). Spring 2015 5
Composite Pedestrian Bridge Placed in Russian City of Starobaltachevo Composite pedestrian bridges are becoming rather common in the US and Western Europe. We have seen dozens of them. Not so, however in Russia. Recently, the first pedestrian single-piece bridge made of composite materials was opened in the village of Starobaltachevo. The project was implemented by request of the Baltachevskogo administration district with the support of the Foundation for Technological Development of the Russian Federation. The village is split in half by a narrow river passing through its center. Springtime often brings flooding which makes the river more hazardous to cross. Each day, on their way to school, children would make a hazardous crossing over the river via a crude wooden bar. Now a beautiful new composite pedestrian bridge traverses the stream an architectural ornament for the village. 6 Corrosion Chronicle The bridge is just under 20 meters in length and 2.5 meters in width, weighing about 10.5 tons. Fiber reinforced plastics (FRP) technology using Derakane 510A epoxy vinyl ester resin provides a structure that is 3 times lighter than the concrete alternative, while maintaining high structural performance and superior corrosion resistance to aggressive media. The most important result of the project however is the opportunity for children to easily and safely traverse the river on their way to school. Ruskompozit, who fabricated the bridge is proud of their accomplishment and has future plans for additional pedestrian bridge designs with lengths of 30-36 meters.
Derakane 470 Resin Enables Development of Huge Chinese Magnesium Facility Qarhan Salt Lake is the largest inland salt lake in all of China covering nearly 6 thousand square km. or 2300 square miles. It is located in Western China near the city of Golmud in the province of Qinghai. QingHai Salt Lake Industry Co. Ltd. (QSLIC) has a long history of potash production at this site. The company is now developing an ambitious project to develop a variety of chemicals from the rich brine source in the lake. QSLIC will invest more than 45 billion RMB ($9 billion USD) to bring the project to fruition making it the largest of its kind in all of China. It begins with the QingHai Salt Lake Magnesium Integration Project. Magnesium metal and polyvinyl chloride will be produced from the magnesium chloride by-product of the existing potash plant. The project also utilizes locally available coal and limestone in a highly integrated plant configuration to produce magnesium, PVC and a variety of other products including coke, polypropylene, soda ash and calcium chloride This project will be divided into two phases, Phase I will include an investment of 16.6 billion RMB ($2.5 billion USD) to bring on line the following production facilities: 100K MT/yr Magnesium plant 1K MT/yr Methanol plant 1K MT/yr MTO (mineral turpentine oil) plant 500K MT/yr PVC plant, and 1K MT/yr soda ash plant All are planned to be commissioned in 2015. Phase II will be 3 times larger than Phase I and targeted for commissing in 2017/2018. Process design, equipment specifications and engineering for the project were awarded to HATCH in Mississauga, Ontario, Canada with the assistance of their Perth, Australia office. Phase I of the project includes 44 large diameter fiber reinforced plastics (FRP) process vessels combined with over 30 kilometers of process piping with diameters up to 4.3 meters. To deal with the severe corrosion conditions and to ensure good quality, FRP equipment for QSLIC, HATCH reviewed a number of fabricators around the globe. Ultimately, the project was awarded to Haohua Zhongyi GFRP Co. Ltd. based in Shijiazhuang, Hebei, China. Haohua Zhongyi has been building fiberglass equipment since 1986 and has become one of the largest fabricators in China for high quality, corrosion resistant FRP vessels and piping. Due to the aggressive corrosive environment and high temperatures, Ashland Derakane Momentum 470-300 Novolac vinyl ester resin was specified for the project. Derakane 470 resin provides superior corrosion resistance performance to FRP designed for chemical service in environments composed of organic chemicals, oxidative acids and higher processing temperatures. For all Phase I vessels on the QSLIC project, Derakane Momentum 470-300 resin was specified by HATCH and supported by the end user as well as by Haohua Zhongyi. We only have confidence in Derakane resins for such complicated corrosion conditions based on the extensive case history in similar projects and our own experience with Derakane resin from early times. It is the very key step to ensure our future success by choosing a reliable resin for HATCH s biggest magnesium project in China. The answer from both Canada and our Perth (Australia) office is quite the same: Derakane resin from Ashland! according to Bryan Ma, Process Engineer, HATCH China for QSLIC. Conditions inside those vessels are very tough, mostly chlorine gas with changing temperatures and changing concentrations. It would be a headache and raise big concerns if we do not use Derakane resins based on our 30 years experience said Jane Zhang, Project manager for QSLIC from HHZY GFRP Co. Ltd. Spring 2015 7
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