Hungarian MOL's BD plant to profit from global supply deficit: analysts

26 August 2013 14:43  [Source: ICIS news]

Budapest, HungaryLONDON (ICIS)--The forint (Ft) 30bn ($135m, €101m) investment of Hungary's MOL group in constructing a butadiene (BD) plant is likely to be profitable over the long term with global BD demand trailing supply, an equities house said on Monday.

“Butadiene could be a good long-term story in Europe,” said Budapest-based KBC Securities, after analysing the potential of the plant which will be built by 2015 in Tiszaujvaros, northern Hungary, the production base of MOL petrochemical subsidiary TVK.

It added, in a note to investors: “While butadiene supply exceeds demand in Europe, global demand outweighs supply, thus placing Europe in an advantageous position. MOL’s butadiene unit is expected to be able to absorb the naphtha surplus of the company’s refineries, thus contributing to profitability improvements.”

BD was one area where Europe's naphtha-fed crackers could provide greater profitability than the growing number of ethane-fed crackers in the US, KBC said.

“Although the feedstock price advantage of the US plants should remain in place, the lower butadiene yield of those plants opens the door to the naphtha-fed EU butadiene plants,” the equities house said.

In May, WOOD & Company investment bank said that the fact that both MOL and Austrian rival oil, gas and petrochemical group OMV – which has committed €230m to boosting its BD production – had announced BD investments showed that BD production was increasingly attractive to oil refining and petrochemical groups looking to build their value chain.

BD is typically used in the production of styrene butadiene rubber (SBR) and acrylonitrile butadiene styrene (ABS).

SBR is used to make tyres, while ABS is used to make plastics for the automotive industry. Another market for ABS is appliances, electronics and plastic piping in housing, KBC noted.

$1 = €0.75)
($1 = Ft222, €1 = Ft298)

By: Will Conroy
+44 20 8652 3214

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