23 April 2012 00:00 [Source: ICB]
Maleic anhydride (MA) is primarily used in the manufacture of unsaturated polyester resins (UPR), which are used in applications such as recreational boats, bathroom fixtures, automobiles, tanks and pipes. Other outlets for MA include 1,4-butanediol (BDO), tetrahydrofuran (THF) and gamma-butyrolactone.
The market for maleic anhydride has been fairly balanced throughout the early part of 2012, with both producers and buyers saying supply is meeting demand. Thus far this year, there have been no unplanned outages, although Huntsman did go through a major turnaround at its plant in Geismar, Louisiana.
The downstream UPR sector seems poised to rebound in spring and summer, particularly in the demand for automobiles, which suffered greatly in the wake of the 2008-09 downturn. In March, US auto sales rose 13% from February, which had also been strong, closing out the industry's best quarter since 2008. After several years of lackluster sales, the recreational boating industry may also make a comeback as a result of improving consumer sentiment.
Beginning in late February, several US producers of MA announced 3 cent/lb increases effective April 1 or as contracts allow. As a primary justification for the increases, the producers have cited "steam value" - the value producers are paid by adjacent plants for excess energy derived from the MA production process.
However, the price of natural gas has dropped precipitously over the past year, making it more attractive as a source of energy for those plants. With the loss of that income, the MA producers said, their margins were diminished, thus making an increase necessary. They have also pointed to the price of butane as a reason for an increase - although that has fluctuated over the first quarter of the year and is significantly lower than it was in late December 2011 and early January 2012.
But most buyers have resisted the "steam value" argument. Since they were not getting a discount when natural gas prices were high, they said, it is unfair to penalize them for the loss of that value now. Some buyers have adamantly refused to pay the increase.
US MA contract prices were at 91.20-97.20 cents/lb ($2,011-2,143/tonne, €1,528-1,628/tonne) FOB USG for March, as assessed by ICIS.
MA is produced commercially by the oxidation of benzene or butane. The butane-based process is considered to have superior economics and is the preferred route used by most producers. Butane-based MA production can be done by either the fixed-bed or fluidized-bed processes.
The fluid-bed process has some advantages over the fixed-bed route, such as lower air-to-hydrocarbon concentration in the feedstock and no need for premixing. The disadvantages include abrasion of the catalyst, conversion rates and by-product formation.
In the fixed-bed route, air is mixed with superheated butane and fed to a reactor containing a catalyst that consists of vanadium phosphorous oxide supported on silica.
Since prices for MA shot up rapidly in early 2011, they have remained fairly stable. Some market players expected prices to drop, but there has been little evidence that this will happen any time soon. Sources said supply and demand factors remain fairly balanced in the medium term.
But some tensions continue between suppliers and buyers, as producers use the price of primary feedstock butane - itself driven by the price of crude oil - as an argument for higher MA prices. Meanwhile, the relatively new factor of "steam value" has created a new arena of pointed discussion between market players.
A few turnarounds at MA plants are scheduled in the spring and early summer months, including at facilities owned by Huntsman, the largest US producer. But these are not expected to cause significant disruptions in supply because they are planned.
Other long-term issues include the challenge for producers of managing increasing costs due to fuel surcharges, diminishing energy credits from the federal government and continuing issues involving environmental and safety compliance.
As butane is phased out of US gasoline blends for the summer driving season, its cost is likely to come down, which would ordinarily lead to a lowering of price for MA, one buyer said.
Exports of MA from the US have been fairly steady since late 2011, although the primary location has shifted from Europe to Latin America. The US continues to be a low-cost producer, based on its reliance on butane as a feedstock, although several European producers have converted to butane from benzene, according to market sources.
US MA export volumes dropped by 10 percent year on year in February 2012, the US International Trade Commission reported in early April. MA exports totaled 5,027 tonnes in February, below the 6,422 tonnes leaving the US in the same month in 2011.
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