INSIGHT: Brazil will drive butadiene growth in the Americas

30 October 2012 17:30  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS)--Consumption in Latin America, particularly in Brazil, will drive demand growth for butadiene in the Americas to 2020 while the shift to ethane cracking tightens the market, a new butadiene study suggests.

And butadiene imports into the US could climb by close to 60% before on-purpose butadiene technologies emerge as an alternative supply option.

US butadiene prices are expected to rise over the longer term, producers believe, because of the move by cracker operators to process more ethane and less liquids. However, that does not mean that the shorter-term volatility that has been a feature of prices so far this year, will be avoided.

That is all down to swings in demand related largely to the industrial production and the all important autos segment, and the on-going restrictions in supply.

In the first quarter of this year, for example, US butadiene prices rose by 49%. But they fell by 26% and another 16% between June and July.

Commenting in August, Michael McDonald, CEO of butadiene supplier, the TPC Group, said the trends would continue.

“Currently BD supply is driven by ethylene plant operating rates and the composition of feed slates. Demand is driven by end-use demand for synthetic rubber, nylon and other products that require [butadiene]. [Butadiene] is also difficult and expensive to store, exacerbating short-term supply/demand imbalances and resulting in price swings.”

The next four years are going to be relatively bleak in terms of butadiene production growth, the consultants GBI Research says in a just released study. And it is predicting a rise in imports to satisfy domestic demand.

US butadiene demand last year was 1.9m tonnes compared with the 1.6m tonnes the country produced. Demand is expected to hit 2.4m tonnes by 2020, while production is likely to climb at a slower rate to 1.9m tonnes.

The US imported 329,118 tonnes of butadiene in 2012 mainly from Canada, South Korea, the Netherlands, China, the UK and Germany. GBI Research expects that import demand to rise by almost 59% to 524,916 tonnes by 2020.

Underpinning the research company’s forecast is a quite healthy 2.9% compound average growth rate which would take demand to close to 3m tonnes in 2020. And while most butadiene demand is expected to remain in the US, it is demand growth in Brazil which looks likely to be the driving force.

Between 2000 and 2011, the data show a steady decrease in butadiene demand of some 15% with US demand falling most strongly. The major end-use sectors for the C4 olefin are styrene butadiene rubber (SBR), polybutadiene and adiponitrile, so a vitally important outlet is tyre production specifically and the automobile sector in general.

Together, the 1.7m tonnes of the product they consumed in 2011 was close to 75% of the Americas total with the plastic acrylonitrile butadiene styrene (ABS) and other products accounting for the remainder.

The breakdown of demand is not expected to shift markedly over the forecast period but the consumption pattern is.

“The large population and growing economies of countries like Brazil mean that they present huge consumption potential,” says GBI Research. That demand growth will be needed should on-purpose butadiene plants come to fruition in North America and the automobile industry remains under pressure.

“This is reflected in the high growth of butadiene downstream segments such as SBR, polybutadiene and ABS,” the research firm adds.

“Because of this, demand for butadiene in Brazil will continue to drive overall demand in the Americas in the future, although the US will continue to be the leading market during the forecast period.”

Read Paul Hodges’ Chemicals and the Economy blog
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By: Nigel Davis
+44 20 8652 3214

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