OUTLOOK ’14: US butadiene market at mercy of consumer habits

02 January 2014 15:00  [Source: ICIS news]

US butadiene market at mercy of consumer habitsHOUSTON (ICIS)--US butadiene (BD) market players feel that consumer choices and gasoline prices will go a long way toward determining their 2014.

“People only have so much money to spend,” one BD buyer said. “Are they going to spend it on tyres or iPods?”

Most US BD is consumed for automobile tyre production – through styrene-butadiene rubber (SBR) – with the strong majority going into replacement tyre sales.

New tyre sales, tied to new car sales, are a small portion of the US SBR market.

“If you’re driving your car less for whatever reason, that’s less wear and tear on the tyre,” another BD buyer said. “That means the replacement cycle gets longer.”

Several BD market players said they think there is some room for optimism for 2014, as the typical tyre replacement cycle is four years.

Coupled with a post-recession boom in auto sales in 2010, 2014 could see tyre demand rebound.

Other market players said that the decline in driving – driven by continued high gasoline prices, urbanisation and environmental concerns – could outweigh or postpone the typical tyre replacement cycle.

Non-rubber BD markets are expected to be slightly stronger, as plastics such as acrylonitrile butadiene styrene (ABS) and nylon, as each is more closely tied to new automobile sales and consumer electronics.

Another continuing concern for BD market players is the expected supply crunch brought on by lower operating rates and lighter cracker feeds.

With US ethane prices allowing most crackers to realise margins of 30-40 cents/lb or more on ethylene production, light feed cracking is expected to dominate in 2014.

This will keep BD and crude C4 production levels low, especially for crackers with no interest in the BD market.

Additionally, margins on BD have softened and overall demand has weakened, preventing BD producers from running at high rates.

The US is expected to again be a net importer of BD, as Asian steam crackers rely on heavier feeds that produce more BD, opening an arbitrage window into the US.


US butadiene price chart

By: John Dietrich

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