HOUSTON (ICIS)--US maleic anhydride (MA) prices are facing upward pressure heading into 2018 amid higher costs for feedstock butane.
Butane prices tend to move up during the winter season as demand is stronger for butane. It is used as an octane additive in winter gasoline blends and for home heating.
Some of the increase in butane prices is also due to upward momentum across the energy sector after an agreement in late November by OPEC and non-OPEC members to extend production cuts until the end of 2018.
If overall energy products are stronger in 2018, then butane prices are likely to be higher, which could put upward pressure on MA prices.
The US Energy Information Administration (EIA) is forecasting that US crude and natural gas production in 2018 will rise due to higher energy prices.
Butane prices are expected to moderate toward the end of the first quarter as warmer weather reduces demand for home heating products, and further moderate in the second quarter as fuel blenders transition to summer gasoline blends.
MA demand is closely tied to general economic growth. The International Monetary Fund (IMF) predicts that the US GDP growth rate will be 2.3% in 2018, up slightly from the projected GDP growth rate of 2.2% in 2017.
Demand could also get a boost in 2018 from post-Hurricane Harvey reconstruction activity in the housing sector.
MA is primarily used in the manufacture of unsaturated polyester resins (UPR), which are used in applications such as recreational boats, bathroom fixtures, automobiles and pipes.
The supply situation is expected to change as a fourth line at the Bartek plant in Ontario, Canada is expected to come online in the fourth quarter of 2017 after construction began two years ago.
Once complete, the fourth line would bring capacity up to 120m lb/year (54,400 tonnes/year). However, much of the product would be used internally.
Other imports into the US market are available. But given the US feedstock advantage for natural gas liquids (NGLs) like butane due to hydraulic fracturing of shale formations, pressure from overseas sellers is soft.
MA prices increased during Q1 2017 as butane costs remained high. MA prices then stabilised for the next several months as butane costs fell from a February high of 128 cents/gal to a June low of 68 cents/gal.
However, MA prices have been moving up since September as butane costs have started to go back up and have remained on the high side in the 100-110 cents/gal range.
As a natural gas liquid, butane is affected by natural gas prices. As a component of gasoline blends, it is affected by gasoline prices.
In North America, major MA producers include Ashland, Flint Hills Resources, Huntsman, LANXESS and Bartek.