15 October 2001 00:00  [Source: ICB]

Industry overcapacity looks likely to increase, with a further 400 000 tonne/year of new global capacity set to come onstream


1,4-butanediol's (BDO) primary use is as a chemical intermediate. The highest volume derivatives are tetrahydrofuran (THF), followed by polybutylene terephthalate (PBT) - an engineering plastic, and gamma-butyrolactone (GBL) derivatives. THF is used to produce polytetramethylene ether glycol (PTMEG), used mainly in spandex fibres, polyurethane elastomers and copolyesters. Other uses are in solvents, coating resins, and pharmaceutical intermediates.


A host of new process developments and strong growth in derivatives demand prompted a spate of debottleneckings and new building in the late 1990s. This trend has continued into the new millennium. The result is sizeable industry overcapacity, which looks set to worsen as a further 400 000 tonne/year of new global capacity comes onstream in the next three-four years. This is despite closures in the first half of this year, which include ISP's 35 000 tonne/year unit in Texas City, US, and Tonen's 30 000 tonne/year plant in Kawasaki, Japan.

Global capacity is currently about 940 000 tonne/year. Capacity utilisation in 2000 was around 82% and is falling. Chem Systems puts world demand at 750 000 tonne last year and this is expected to remain unchanged in 2001 given recent events and the downturns in end-use industries, ie automotive. The market remains highly captive, with a number of producers, such as BASF, heavily integrated downstream. Debt-laden Sisas (Eurodiol) was acquired by BASF in July.


Prior to the entry of Sisas in 1998 and the proliferation of Asian projects, list prices lay in the $2500/tonne range. However, in recent years, prices in the $1250-$1450/tonne range (or below) have been prevalent. It is hoped that BASF's acquisition of Sisas this year may lead to more stable prices, at least for the short term. However, the ongoing increases in capacity may yet lead to further price erosion.



The Reppe process is the original route where acetylene is reacted with formaldehyde. The first non-acetylene route was developed by Mitsubishi Chemical using butadiene as feedstock. This process is tunable to give either or both BDO and THF. Later developments include Lyondell, which uses propylene oxide as feedstock. In the early 1990s Kvaerner licensed its first BDO plants based on the esterification of maleic anhydride followed by hydrogenation.

This year BP/Lurgi commercialised its Geminox process, which combines BP's catalytic oxidation of butane in air using a fluidised bed, with Lurgi's fixed bed fatty acid hydrogenation technology. Kvaerner's process can also be designed to make BDO and coproducts THF and GBL in given ratios, (within certain limits) and this technology will be applied in the new BASF/Petronas plant in Malaysia.


Mark Morgan of Chem Systems believes demand growth will average 5.5%/year over the next five years, although this has to remain uncertain given recent events. If all projects go ahead on schedule and no more plants are closed, then the market could be heavily oversupplied by 2005, with global capacity reaching over 1.45m tonne/year. Only if demand growth exceeds 8-9%/year, 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 have attractive cost profiles and provided they can lift operating rates to a reasonable level, they may be able to fight for market share.

However, around two-thirds of the BDO market is captive and more than half of the remaining third is tied up in long-term year contracts, making it extremely difficult for new merchant producers to break into the market. This could result in a price war, as seen when Sisas entered the market. It could prove a difficult time for all producers as BASF and ISP, with large captive consumption, will not easily relinquish market share to merchant producers.


Company Location Capacity
BASF Feluy, Belgium 70
Ludwigshafen, Germany 190
ISP Marl, Germany 90
Lyondell Botlek, Netherlands 1271
Middle East
Al Jubail, Saudi Arabia 502
BASF Geismar, Louisiana, US 135
Geismar, Louisiana, US 1003
BP Lima, Ohio, US 65
DuPont LaPorte, Texas, US 110
Lyondell Channelview, Texas, US 55
BASF Ulsan, South Korea 25*
Kuantan, Malaysia 604
Dairen Kaohsiung, Taiwan 30**
Chiba, Japan 25
Chemical Yokkaichi, Japan 33*
Yokkaichi, Japan 335
Nan Ya Chi Ayi, Taiwan 40**
Korea PTG Ulsan, South Korea 30
TCC Changhwa, Taiwan 30
Shingli China 8
Other China 20**

* flexible BDO/THF
** expansions planned
1 onstream H1 2002
2 onstream H2 2003
3 timing under review
4 onstream H1 2003
5 onstream 2002
Source: Chem Systems

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