AFPM ’15: Global BD overhang looms over market – US TPC

Al Greenwood

30-Mar-2015

Michael McDonnellInterview article by Al Greenwood

SAN ANTONIO, Texas (ICIS)–A supply overhang looms over the global butadiene (BD) market, which should start returning to a more balanced state by the second half of the decade, the head of US-based TPC Group said on Monday.

The overhang has persisted for the last 12 months, TPC CEO Michael McDonnell said on the sidelines of the American Fuel & Petrochemical Manufacturers (AFPM) International Petrochemical Conference (IPC).

Long term, global BD supply should grow by about 2% a year, while demand should grow by 3.7% a year, he said. However, neither supply nor demand is currently growing at these rates. BD demand is driven by the replacement tyre market and global GDP growth rates, McDonnell said.

The outlook for global growth is weak, and tyre demand is soft, McDonnell said.

On the supply side, crackers are operating at higher rates, and more plants have started up in Asia, McDonnell said.

BD is a co-product of ethylene and supplies are driven by ethylene production. As a result, companies cannot respond to BD oversupply by reducing production.

As a result, prices fall, reaching a point where companies begin to either crack BD or convert it into butylene, in a process called hydrotreating.

That is now occurring, McDonnell said.

Looking ahead, supply and demand should reach their long-term growth rates of 2% and 3.7%, he said, and demand should ultimately outstrip supply.

In North America, tyre demand may improve because people are driving more, taking advantage of low fuel prices, McDonnell said. That trend could quicken as the US approaches the summer driving season.

In addition, European crackers will likely continue switching to lighter feedstocks imported from the US. That would reduce BD production. 

Already, European crackers are using liquefied petroleum gas (LPG) as a feedstock, and others are expected to switch to ethane.

US companies are on track to open ethane export terminals as well as increase LPG export capacity – and these terminals will target European crackers.

The AFPM IPC runs through Tuesday.

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