One of the key conclusions in our 2008 Study, ‘Feedstocks for Profit’, was that butadiene had the potential to go very tight in a Global Downturn Scenario. And as the chart above shows, prices are now rising sharply in the 3 major Regions.
The rationale for the lack of supply is that the gas-based crackers in the Middle East are now starting up. In turn, this is causing liquids-feed crackers in other regions to reduce rates, as their ethylene production cost is much higher. Thus the supply of co-products is reduced. And whilst propylene and benzene, the other main co-products, can be obtained from refineries, butadiene supply depends on liquids-feed crackers.
In addition, of course, the sharp differential between natural gas/LPG and crude oil values is encouraging producers in other regions to maximise lighter-feeds. And so butadiene supply is further reduced. As ICIS news reports, ABS is now “short” in Europe, and “critically tight” in the USA. Whilst butadiene spot prices in Asia (green line) temporarily moved up over $2100/t in January.