22 November 1999 00:00 [Source: ICB]Impending global capacity increases look set to swamp global markets in the first few years of the next decade
A host of new process developments and strong growth in derivatives demand has prompted a spate of debottleneckings and building in the second half of the 1990s. The result is sizeable industry overcapacity, a situation that looks set to worsen as a further 500000 tonne/year of new capacity comes onstream globally in the next three years. Capacity utilisation in 1998 was around 71% and is falling. World demand for BDO was put at 610 000 tonne in 1998 and is forecast to be around 630 000 tonne in 1999. Current global capacity is now around 900 000 tonne/year, following the recent startup of the additional Sisas capacity and BASF's Ulsan, Korea, unit. If all planned projects go ahead and no plants are closed, global capacity will be over 1.5m tonne by 2003.
Tetrahydrofuran (THF) is the largest downstream destination for BDO, accounting for over 36% of sales in 1998. THF is used in the production of polytetramethylene ether glycol (PTMEG), used mainly in polyurethane elastomers like Spandex fibres. Polybutylene terephthalate (PBT), an engineering plastic, accounts for 32% of sales, gamma-butyrolactone (GBL) around 14% and polyurethanes 12%. Other miscellaneous uses are in solvents, a raw material for coating resins, chemical and pharmaceutical intermediates.
Prices in Europe have dropped sharply to DM1.8-1.9/kg since new merchant production came onstream this year. In the US prices which had been around $2600/tonne have halved to $1100-1200/tonne and even lower. In Asia numbers as low as $950/tonne cif main port are talked.
The established route to BDO has been the Reppe process based on acetylene and formaldehyde. Lyondell, formerly Arco, uses a process developed in conjunction with Kuraray, Japan, in which propylene oxide is catalytically isomerised to allyl alcohol which is then hydroformylated and hydrogenated to 1,4-butanediol. The Toyo soda process is via butadiene chlorination. Newer processes have been developed to overcome the shortage of acetylene and use maleic anhydride or n-butane or butadiene as starting points. DuPont at Gijon, Spain, has a process that starts with n-butane via maleic anhydride to produce THF. Sisas also has a new process that directly hydrogenates MA to THF, GBL and NMP.
|Eurodiol (P)||Feluy, Belgium||1062|
|Lyondell (P)||Botlek, Netherlands||125 (2001)|
|GACIC/||Saudi Arabia||50 (Q1 2002)|
|BASF(P)||US Gulf Coast||100 (2003)|
|BP/Amoco (P)||Lima, Ohio||65 (mid-2000)3|
|ISP||Texas City, Texas||35|
|BASF||Ulsan, S Korea||50|
|Shinwha||Ulsan, S Korea||24|
|Mitsubishi Kasei||Yokkaichi, Japan||50|
|Shanghai Oil (P)||Shanghai, China||30|
|NanYa (P)||Yunlin, Taiwan||40 (2004)|
|TCC (P)||Changhwa, Taiwan||30 (2001)|
|BASF/Petronas (P)||Kuantan, Malaysia||100 (2002)|
P = project
1 BASF is expanding its acetylene-based production at Ludwigshafen to 190 000 tonne/year and announced March 1999 a 100 000 tonne/year butane-fed project at Geismar, Louisiana, onstream 2003.
2 Eurodiol (Sisas) has postponed this project and now has under consideration BDO-derivative capacity either in the US or Europe.
3 BP Amoco has under study a further 120 000 tonne/year unit at the Lima site.
4 Dairen has talked of a project to convert a 120 000 tonne/year VAM plant to BDO production.
SOURCE: ECN/CHEM SYSTEMS
If planned new capacity goes ahead, closure of old, uneconomic capacity will be the only way to return even a reasonable balance to the markets over the next few years. So far there has been only one closure, the 25 000 tonne/year ISP unit in Kentucky, US. None of the anticipated closures of other uneconomic, older and smaller non-integrated units has happened so far.
Mark Morgan of Chem Systems believes, on average, demand for BDO will grow at 4.5%/year over the next five years. Only if demand growth doubles to 8-9% is there any prospect of demand catching up with projected supply, and even then not before 2006. The degree of downstream integration is an important factor determining each producer's current and future operating rate. However, new merchant suppliers with attractive cost profiles, if they can lift operating rates to a reasonable level, are fighting to build market share. Around two-thirds of the BDO market is captive and more than half of the remaining third is tied up in 10-20 year contracts. This makes it extremely difficult for new merchant producers to break into the market. While the supply behaviour in BDO is moving it towards commodity status, buyers are producers of performance products with a speciality mindset.
Producers like BASF and ISP with large captive consumption will not easily relinquish market share to merchant producers like Sisas and GACIC. BASF's new capacities in Ulsan and the 100 000 tonne/year Malaysian unit which comes onstream in 2002 substitutes for supply out of Europe, putting further pressure on the European market.
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