The C4 challenge

Europe, Markets, Olefins, US
By John Richardson on 07-Mar-2011

By Malini Hariharan

C4 buyers are a troubled lot. Availabilty of the product is tight and will remain so for the foreseeable future.

So it was not surprising to hear that concerns about C4 supply dominated discussions at the recent 6th ICIS World Olefins Conference in Brussels.

From a surplus in 2010, Europe is predicted to be short in 2011. The region is also expected to emerge as a net importer with demand growing by 20,000-40,000 tonnes/year.

The weakness of the European raffinate 1 market relative to its feedstock, crude C4, and its co-product butadiene (BD) will have a negative impact on butadiene extraction utilisation rates if it persists, INEOS market manager for C4s David Cartwright said at the conference.

He pointed out that raffinate 1 pricing had fallen into a negative €45/tonne ($62/tonne) spread on average in the 2010-2011 period, having previously averaged a premium of €48/tonne in the pre-crisis 2006-2007 period, and that this was not sustainable.

If BD extraction rates were to be limited by poor raffinate market performance, it would be another nail in the coffin for European BD consumers already facing the prospect of tightening BD supplies and soaring prices, reported ICIS pricing editor Nel Weddle from the conference.

And the supply outlook in the US is equally grim as the crackers were expected to continue using ethane as feedstock.

Ethane presently accounts for around 65% of US cracker feedstocks, but the Barry, Dow Chemical’s co-monomer and global C4s business director, estimated that number would rise to 70% by 2015.

Buyers are now hoping that high BD prices would push some end-users out and help demand and supply return to a more balanced position.

“There is a natural cap to future BD price increases, some will be forced to exit,” said Christof Krogmann, vice president petrochemical projects of major BD consumer LANXESS.

The high prices could also make alternative on-purpose routes viable. This includes butane/butene dehydrogenation and bio routes to C4.