Crude C4 to remain tight for next 3-4 months

12 May 2008 18:41  [Source: ICIS news]

HOUSTON (ICIS news)--North American supplies of crude C4 will likely remain tight for the next three to four months, putting upward price pressure on downstream butadiene (BD), an executive of a US producer said on Monday.

BD is a feedstock for styrene-butadiene rubber (SBR), a major ingredient for tyres.

Throughout this year, planned and unplanned outages have reduced supplies of crude C4, said Charlie Shaver, chief executive of Texas Petrochemicals, a US BD producer. Texas Petrochemicals buys crude C4 to produce finished BD.

In addition, crackers are using natural-gas liquids (NGL) as feedstock instead of naphtha, Shaver said. The NGL feedstock produces less crude C4.

As such, the availability of spot crude C4 in the domestic market continued to be non-existent, except for imports, one source said.

As a result of the shortage, Texas Petrochemicals has been on an 85% allocation since February, Shaver said.

Plants from four major crude C4 producers have since returned online, Shaver said. However, the company's crude C4 volumes will likely remain off by 10-15% year over year for the next three to four months, he said.

The feedstock shortage has caused prices of downstream BD to increase substantially, he said.

May contract prices for BD were 77 cents/lb or $1,698(€1,104)/tonne FOB (free on board ) USG (US Gulf), up from 58 cents/lb a year ago, according to global chemical market intelligence service ICIS pricing. US BD contracts have settled at record highs for five months in a row.

If BD prices remain high, it could attract more imports of crude C4 into North America, addressing the supply shortage, Shaver said.

($1 = €0.65)

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