US chemical profile: Butanediol

26 September 2011 00:00  [Source: ICB]

USES
The largest consumer of 1,4-butanediol (BDO) is tetrahydrofuran (THF), used to make polytetramethylene ether glycol (PTMEG), which goes mainly into spandex fibers, urethane elastomers and copolyester ethers. The next largest outlet is polybutylene terephthalate (PBT). Sizeable quantities of BDO go into the production of gamma-butyrolactone, which has uses in electronics, pharmaceuticals, agrochemicals and high-performance polymers.

SUPPLY/DEMAND
Demand has been strong globally in the first half of 2011 and is better than expected. Players say the market has been improving since late 2009, although it is not back to levels seen in 2008.

A major producer reported overall growth in Europe of about 5% in the first half, with demand into PBT and polyurethane (PU) growing the fastest. A major BDO buyer and producer of PBT also cited market growth of 5% so far this year.

However, demand in Europe has slowed in the third quarter as uncertainty over the economic situation grips the market and players are keeping inventories low.

Supply has stayed tight globally this year. In Europe, limited imports have been seen from Asia, where demand has been robust and requests for additional material outside contract volumes have been turned down. The situation in Europe was exacerbated by a force majeure at BASF's site in Ludwigshafen, Germany, after a fire at a precursor plant on May 30. The German chemical major lifted the force majeure on September 20 and full rates have been resumed. Players say the market is now balanced to tight with no supply problems.

US specialty company Ashland has bought International Specialty Products (ISP) for $3.2bn (€2.2bn). The deal closed on August 23. It is not yet clear what Ashland will do with the BDO business as the BDO assets were not core for US-based ISP and are not likely to be core to Ashland either.

PRICES
BDO prices in Europe have risen continuously since the second quarter of 2009, hitting a record high this quarter. European contracts have leapt this year by an average €65/tonne ($89/tonne) in the first quarter, €75/tonne in the second, and €200/tonne in the third quarter, taking the range to €2,250-2,300/tonne FD (free delivered) NWE (Northwest Europe).

Buyers expect a reduction in the fourth quarter based on weaker demand and lower feedstock costs, such as propylene, which fell €37/tonne in September. Producers, however, point to price increases in the US and firming spot prices in Asia.

TECHNOLOGY
The first commercial route was the Reppe acetylene process. The first non-acetylene route was Japan-based Mitsubishi Chemical's butadiene (BD) process which makes BDO, THF, or both. Netherlands-based LyondellBasell uses propylene oxide (PO) and Taiwan's Dairen Chemical uses allyl alcohol from propylene. Several butane-based technologies were commercialized in the 1990s.

Bio-based routes to BDO are in development, mostly based on succinic acid derived from biomass or a sugar substrate. Large-scale production plants are likely to be running within the next two years. US-based Genomatica and Italy's Novamont expect to have Europe's first commercial bio-BDO plant on line by late 2012.

OUTLOOK
Demand in Europe is predicted to grow in line with GDP rates, at about 2-3%/year. Global growth is higher at about 5%/year, with the strongest growth of 7-8% in Asia. The main drivers of growth remain PBT, particularly into the automotive sector, PU and derivatives such as PTMEG for spandex applications. Producers say one of their main challenges is the sustainable profitability of the BDO business. Key opportunities highlighted include the development of new applications for BDO or BDO derivatives such as new PBT compounds or new PU systems. The future impact of bio-based BDO is hard to predict, but producers and consumers say it will depend on its cost competitiveness and customers' willingness to accept a "bio-premium."

New investment in Europe is focused on bio-BDO. Investment in petrochemical-based BDO projects continues to be concentrated in China, with several plants due on stream in the next two to three years.

The additional capacity is expected to have a big impact on availability and pricing in the region, cutting European and US export opportunities as, on paper, there will be more than enough to fulfil even the most optimistic forecasts, one player said.

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By: Elaine Burridge
+44 20 8652 3214



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