Petrochemicals: On-purpose BD may offset supply restrictions

16 April 2012 00:00  [Source: ICB]

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US shale gas hits BD supply

Although US crackers are taking advantage of abundant shale gas reserves by switching to lighter natural gas-based feedstocks, the shortfall in butadiene (BD) supply could be met by on-purpose production.

Michael McDonnell, president of US-based producer TPC Group, has suggested the world will be short by 1.7bn lb/year (771,000 tonnes/year) of
BD by 2017.

"The product is critically short and by no small amount," McDonnell said at the International Petrochemical Conference, hosted by the American Fuel & Petrochemical Manufacturers (AFPM), in early April. "That has to be fulfilled in some way."

Nearly all of the world's BD is produced by extracting the monomer from crude C4. Crude C4, in turn, is produced from cracking heavy feedstock such as naphtha. TPC Group produces BD through crude C4 extraction, but also owns the Oxo-D technology, which is used in on-purpose BD production.

TPC's forecast assumes modest demand growth, and it does not assume that high BD prices could destroy demand, said McDonnell. Also, the forecast does not include the company's planned on-purpose BD plant in Houston, which could have a capacity of 600m lb/year and start during the latter half
of this decade.

Meanwhile, US BD buyers have dubbed the latest contract settlement "a mess" after three different prices were agreed for April, and suggest that the monthly contract mechanism needs to be reconsidered.

The three-tiered contract followed nominated increases of 7 cents/lb ($154/tonne, €116/tonne), 10 cents/lb and 15 cents/lb.

Prices had been widely expected to rise in April for the fourth increase in as many months. March contracts were split at $1.45/lb and $1.55/lb.

The uptrend stems from constrained supply rather than strong demand, one source said, referring to restrictions at two US BD producers, which were on allocation at 45% and 70% in March because of cracker turnarounds.

The outlook for BD after April is uncertain, with some predicting that the market could have peaked with the April increase, with others suggesting BD could still reach the record levels of 2011, when contracts hit $1.75/lb and spot prices rose past $2.00/lb.

  • Additional reporting by William Lemos

Author: Andy Brice and Al Greenwood



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