Asia Chemical Profile: BDO

24 August 2012 11:36  [Source: ICB]

Uses
The largest downstream product of butanediol (BDO) is tetrahydrofuran (THF), used to make polytetramethylene ether glycol (PTMEG), which goes into spandex fibers, urethane elastomers and copolyester ethers. The next largest outlet is polybutylene terephthalate (PBT). Sizeable quantities of BDO go into the manufacture of gamma-butyrolactone, used in electronics and high-performance polymers.

Supply/demand
BDO capacity in Asia accounts for more than half of global capacity, close to 1.2m tonnes/year. And among Asia, China is the largest BDO producer, followed by Taiwan, Japan and South Korea.

By August 2012, the total BDO capacity from around 11 producers in China reached 619,000 tonnes/year.

In the following months, China is expected to see around 240,000 tonnes/year new capacity to start up. However, some plants will be delayed to next year if market fundamentals remain weak.

On the demand side, consumption was estimated at 350,000 tonnes/year in 2011, with nearly half of the demand from the THF sector. Demand is predicted to grow by 10-15% in 2012, better than GDP growth in China and attributable to the fast development of engineering plastics like PBT resins.

With the increasing domestic supply, major producers will seek export opportunities in the future given the oversupply in the domestic market. In the meantime, end-users in China will reduce imports sharply because of the availability of cheaper Chinese domestic materials. In 2011, the BDO imports were 52,800 tonnes, and the number will likely decrease by 10% in 2012.

Prices
The oversupply, combined with weak demand from downstream rigid polyurethane (PU), PBT and PTMEG industries this year exerted downward pressure on the Asia market. BDO prices started to fall this past April when global crude futures and other upstream petrochemical prices slipped amid the eurozone debt crisis and the economic slowdown in the US.

China's domestic producers had to either shut down their plants or reduce their operating rates to cope with slack demand and squeezed margins. The average operating rate of BDO plants in China was at around 50-80% in the second quarter of this year.

Regional producers shifted their cargoes to other regions instead of exporting cargoes to China because of lower prices in the key import market, coupled with supply glut.

BDO prices hit bottom in early July and rebounded in line with the restocking activities from end users. In the week ended August 14, BDO bulk prices were at $2,100-2,200/tonne CFR China, as assessed by ICIS.

Technology
There are a number of process technologies for the production of BDO. The Reppe process is the traditional method, where acetylene is reacted with formaldehyde.

Netherlands-based LyondellBasell uses a three-step conversion of propylene oxide (PO), developed in conjunction with Japan-based Kuraray.

Newer processes use maleic anhydride or n-butane as starting material. UK-based BP Chemicals and German engineering firm Lurgi developed an integrated butane-to-BDO process called the Geminox process, which is employed at International Specialty Products' plant in Lima, Ohio (formerly owned by BP Chemicals).

The Geminox process combines BP's process for the catalytic oxidation of butane in air using a fluidized bed with Lurgi's fixed-bed fatty acid hydrogenation technology.

Outlook
With new capacity to come on stream in the next few years, imports will be decreased further, and China will go from being a dominant importer to an exporter. Regarding downstream sectors, the fast-growing PBT resin market will become the key driver for BDO consumption, while PU and THF will experience moderate growth. Domestic BDO prices will be under pressure and competition for BDO producers will become more fierce in coming years.


Author: Judith Wang and Feliza Mirasol



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