03 March 2010 22:04 [Source: ICIS news]
BRUSSELS (ICIS news)-- The global butadiene (BD) supply and demand balance is likely to remain tight in the near future because supply will not match forecasted demand growth, market sources said on Wednesday.
While butadiene as a molecule was getting more attractive to cracker operators since it was in short supply, there were limited possibilities - at least in the next five years - of redressing this imbalance.
While short supply would most likely result in firm pricing, they would not be high enough to incentivise most global cracker operators to produce butadiene, sources said.
There would be no case of “the tail wagging the dog” which was suggested by some participants at the 5th ICIS World Olefins Conference and referred to the fact that there could be a reversal of the trend up until now at least, that ethylene was the main driver.
Butadiene was still being viewed firmly as a byproduct of cracker operations.
“The technology is out there, but economics mean that it [the cost of producing on-purpose butadiene] would be prohibitive” said Craig Barry, business director, co-monomers and global C4s for Dow Chemical in a panel discussion at the conference.
“What price would BD have to be to drive the cracker? You don’t even want to know the price” said Barry.
Butane dehydrogenation (BDH) technology is there, but it would be a huge investment, sources said.
The imbalance between supply and demand of butadiene in the next five years would mean that Asia and the
Supply was expected to be further constrained because crackers in Europe, and to a lesser extent in the US, would most likely have to run at reduced rates because of the onslaught of ethylene capacity additions in the Middle East and Asia, as well as the increased flexibility to crack lighter feeds which produce less crude C4, the feedstock for butadiene.
The workable substitution of butadiene looked like a limited possibility as well.
Natural rubber was the obvious alternative to synthetic rubber, but emissions legislation and gas consumption issues meant that it was not a viable alternative for tyres.
Not least the seven year time frame between the planting of trees and harvesting, plus the fact that other crops for biofuels had probably superseded the desire to go for rubber.
Other butadiene applications such as latex reported that substitution was threatened by cheaper alternatives such as butyl acrylate, but that this amounted to only a very small portion of the whole.
The basic premise was that the BD molecule would remain short, and European consumers who had so far enjoyed the cheapest global prices would eventually have to pay competitive rates to keep supply within
“The arbitrage window will have increasing influence on BD pricing within
European butadiene spot prices had soared to a minimum of €1,400/tonne ($1,892/tonne) FOB (free on board) NWE (northwest Europe), according to global chemical market intelligence service ICIS pricing, but concluded business was thin on the ground as spot availability was so limited.
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