OUTLOOK '18: Increasing US BD supply putting pressure on sellers

Source: ICIS News


HOUSTON (ICIS)--Supply of domestic butadiene (BD) in 2018 is expected to increase on the start-up of several new crackers, putting pressure on domestic BD producers to increase market share.

That will mean being more competitive on pricing relative to imported material from Europe, which will still be looking to move product into the US.


Four new crackers are expected to start up operations in 2018, adding around 130,000 tonnes/year of BD the market, assuming typical 3% yields relative to ethylene.

There are some concerns that US ethylene supply could increase too quickly relative to consumption, however, necessitating cutbacks at other crackers.

As most of those crackers are running a feedslate heavier than the new crackers, that could lead to a decline in BD availability.

Most are expecting new US ethylene production to be consumed without the need for cutbacks, however.

Additionally, heavier feedslates such as butane and propane are likely to become less attractive as their prices increase alongside crude oil, especially relative to low-cost ethane. That could curb some of the supply increase expected for BD in 2018.

Butadiene (BD) is a raw material used in the production of tyres.

The increase in supply is expected to outpace demand growth, as the tyre sector continues to face stagnant growth levels.

Most market participants are not expecting tyre-based demand to grow by more than the US GDP in 2018.

There is some pressure on imported rubber via tariffs and increased duties that could cut into volumes entering the US and boost domestic production.

Most sources expect that rubber imports will likely remain at steady levels, however, limiting demand growth for the US.

Other BD derivatives, such as nylon, high-impact polystyrene (HIPS) and acrylonitrile-butadiene-styrene (ABS) copolymer, are expected to grow around the GDP level or above.


Export demand for US BD is expected to be volatile, as strong periods of Asian demand will open up limited arbitrage windows.

Market participants are not expecting the same level of increase in BD exports to Asia that were seen to start 2017.

Major US BD producers include ExxonMobil, LyondellBasell, Shell Chemical and TPC Group.