OUTLOOK ’19: US MA to face downward pressure from feedstock butane

HOUSTON (ICIS)–US maleic anhydride (MA) is facing downward pressure at the start of 2019 amid lower costs for feedstock butane.

The decrease in butane prices is primarily due to downward momentum in the energy sector that started in October amid a supply glut and bearish economic fundamentals.

Butane prices generally move up during winter as demand gets stronger for butane. It is used as an octane additive in winter gasoline blends and for home heating.

However, they have been volatile since Q4 2018, defying the usual seasonal trends and instead moving in sync with crude.

Butane prices should 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.

If the overall energy complex strengthens in 2019, butane could move higher, putting upward pressure on MA.

Domestic butane supply could come under pressure from strong export demand, although additional natural gas liquid (NGL) fractionation capacity is being built in the US Gulf Coast region to meet rising and robust petrochemical feedstock demand.

Enterprise Products Partners is expanding export capacity for liquid petroleum gas (LPG) by about 30% at its terminal on the Houston Ship Channel as domestic export terminals are approaching full utilisation. LPGs include propane and butane.

MA demand is closely tied to general economic growth. The International Monetary Fund (IMF) predicts that the US GDP growth rate will be 2.5% in 2019, down from the projected GDP growth rate of 2.9% in 2018.

Global consumption could soften amid sharp declines in crude prices, rising interest rates, the ongoing trade war and a deteriorating global economic outlook.

Resolution of the US-China trade dispute would improve macroeconomic conditions, and in turn improve demand growth in key downstream markets.

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.

INEOS Enterprises has completed the acquisition of the chemical intermediates business of Flint Hills Resources, known as Flint Hills Resources Joliet.

INEOS Joliet will manufacture MA and other products at its facility near Chicago, Illinois.

MFG Chemical is upgrading its plant in Pasadena, Texas, through debottlenecking and the addition of new capacity. The investment is scheduled to be completed by the end of Q1 2019.

The company acquired the plant in March 2018, making it one of the largest consumers of MA. The company also has three plants in northwest Georgia.

MA imports into the US market are available. However, given the US feedstock advantage for NGLs like butane due to hydraulic fracturing of shale formations, pressure from overseas sellers is soft.

Also, most imports come into the solid MA market, rather than the molten sector. Solid MA imports thus compete more with MA buyers in the US, rather than producers, which focus on molten material.

As a NGL, 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.

Focus article by Tarun Raizada

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