US BD supply eases following tight year

HOUSTON (ICIS)–US butadiene (BD) supply should continue to improve amid a wave of cracker startups slated for 2019. So far in early 2019, longer supply has kept prices relatively stable compared with the tightness of 2018.

The ICIS Contract Reference Price (CRP) for US February BD settled at 49.25 cents/lb ($1,086/tonne), down by 0.75 cent/lb from January.

Three producers settled at separate declines of 1 cent/lb, while one producer settled at a rollover.

US BD Contracts (in cents/lb, separately issued)

	Feb Nomination	Jan Settlement
Producer 1	49	50
Producer 2	49	50
Producer 3	50	50
Producer 4	49	50

Flat to slight declines were expected for February contract prices, as supply is ample while demand is seasonally lower.

Asia prices had been higher than in the US, although a downtrend has emerged, as demand is sluggish in the region, providing further support for a US decline.

Tight supply drove a 30 cent/lb price spike during 2018, but prices are now down by 24 cents/lb from the high point, beginning with steep declines in November and December.

Improved availability of both feedstock crude C4 (CC4) and BD helped drive the declines.

As crude prices have fallen from nearly four-year highs in early October, cracking of heavier feedstocks is supported, which yields more CC4.

“The US is a little long but not terribly,” a source said. “They’re running heavier slates, so that helps supply levels.”

Supply is expected to grow this year as new ethylene capacity continues to improve availability of CC4.

Even though most new crackers are designed to use as a feedstock purity ethane, which produces the least amount of co-products like CC4 when cracked, production will rise.

About 6m tonnes/year of ethylene capacity is expected to start up by the end of 2019.

The US has BD capacity to process additional CC4 as it becomes available.

Lengthening supply should keep prices lower after a volatile 2018 and shift the market from a historical position of tightness, creating opportunities for growth in derivative markets and potentially for exports.

Demand will pick up in spring, although supply is expected to be ample to meet demand.

US BD producers are TPC Group, Shell, LyondellBasell and ExxonMobil.

Focus article by Amanda Hay