Butadiene Oversupply Threat

By John Richardson

THERE is a lot of talk at the moment about on-purpose butadiene, via the butane dehydrogenation process, because of the recent extreme market tightness .

The tightness is the result of a shift to lighter cracker feedstocks and reduced operating rates at naphtha crackers in Europe.

Future feedstock patterns are also not expected to aid the availability of co-product butadiene.

The surge in ethane availability  in the US, via shale gas, has led to announcements  for up to a 29 percent addition to the country’s ethylene capacity by 2017. Ethane feedstock for steam cracking, of course, yields very little C4s and therefore butadiene.

And in China, the rise of coal to chemicals – again replacing what would have otherwise been naphtha-based petrochemicals capacity – is no help. The coal-to-methanol-to-olefins and coal-to-methanol-to-propylene processes yield very little, if any, C4s.

Hence, Texas Petrochemicals is planning to bring a 270,000 tonne/year butadiene plant -based on its butane dehydrogenation process – onstream in Houston,Texas, by 2016.

“There are also two butane dehydrogenation projects in China that we know of, and perhaps a few more,” said an industry source.

In addition, Asahi Kasei Chemicals plans to produce butadiene from butene, via its new BB-FLEX technology. The company is considering building a 500,000 tonne/year plant in Mizushima, Japan, based on the process, for start-up in 2014.

It is not only tight supply that is justifying all this interest in on-purpose butadiene, but also claims of booming autos demand.

“Autos demand is growing very rapidly and, of course, in countries such as China you now have a much bigger demand base for replacement tyres,” said the industry source.

“And so even if you don’t get much auto demand growth, which has been the case in China over the last two years, replacement tyres are still sufficient to ensure a lot of demand. Sixty percent of global butadiene demand is accounted for by the need to replace tyres.”

Natural rubber supply has also been constrained over recent years because of the switch to more-profitable crops such as palm oil.

It takes 7-9 years for a rubber plantation to reach maturity, and so it will take a long time for the recent rise in butadiene prices to result in a compensating surge in natural-rubber availability.

The conventional wisdom, therefore, is that butadiene is a fantastic investment bet.

“At the moment, yes, I agree, but it would only take a few of these on-purpose plants to be built and the market would be oversupplied,” said a synthetic rubber industry executive.

“And don’t assume that that the Western mindset applies to China. It might continue to add capacity, even when the market is close to balance or already oversupplied, because of access to cheap capital.”

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