Raffinates could be extra factor limiting Europe BD supply - INEOS

02 March 2011 17:35  [Source: ICIS news]

BRUSSELS (ICIS)--The weakness of the European raffinate 1 market relative to its feedstock, crude C4, and its co-product butadiene (BD) will have a negative impact on butadiene extraction utilisation rates if it persists, INEOS market manager for C4s David Cartwright said on Wednesday.

Speaking at the 6th ICIS World Olefins Conference in Brussels, Belgium, Cartwright said that raffinate 1 pricing had fallen into a negative €45/tonne ($62/tonne) spread on average in the 2010-2011 period, having previously averaged a premium of €48/tonne in the pre-crisis 2006-2007 period, and that this was not sustainable.

“Extraction capacity will become under-utilised unless [there is] a positive contribution from raffinates,” he added.

Raffinate 1, primarily a precursor for methyl tertiary butyl ether (MTBE), a key gasoline component, was currently in oversupply because extraction units had been running hard, incentivised by the good returns on butadiene. This, plus a weak gasoline market, had depressed raffinate 1 prices.

“BD is supporting a cheap raffinates price, but will the economics always be there to support it?” said Cartwright.

If BD extraction rates were to be limited by poor raffinate market performance, it would be another nail in the coffin for European BD consumers already facing the prospect of tightening BD supplies and soaring prices.

Most industry sources were forecasting that BD demand would outstrip supply because of the expected under-utilisation of European crackers due to new Middle East capacities, and the preference to crack lighter, more competitive feeds. All of which would limit the production of BD and raffinates feedstock crude C4.

However, there could be some relief on the horizon, according to Christof Krogmann, vice president petrochemical projects of major BD consumer LANXESS.

He said that high BD prices could potentially lead to the lower-margin producers in certain sectors exiting the market, thereby freeing up BD.

“There is a natural cap to future BD price increases, some will be forced to exit,” he said.

He added that the alternative manufacturing routes to the C4 molecules, such as selective dehydrogenation, were becoming increasingly attractive.

“How far away are we to the natural cap in [BD] prices? I am surprised that it hasn’t happened already,” he said.

BD recently settled for March at €1,555/tonne, up €115/tonne from February. This was a record high since records began in 1986.

($1 = €0.73)

For more on raffinate 1, C4 and BD visit ICIS chemical intelligence


By: Nel Weddle
+44 20 8652 3214



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