ICIS Webinar: Improved margins for heavy cracking, weak demand pressure US BD prices lower

HOUSTON (ICIS)–Improved margins for cracking heavier feedstocks such as naphtha and liquefied petroleum gas (LPG) along with weaker demand have pressured prices for US butadiene (BD), ICIS Analyst Ciaran Healy said. He gave his remarks in a webinar, part of a series hosted by ICIS.

Healy noted that in February of 2020, global average prices for the three major olefins – ethylene, propylene and butadiene – were tightly clustered, with propylene values around 8% higher than ethylene and BD prices around 8% lower than ethylene.

The onset of the coronavirus crisis and the accompanying drop in oil prices has incentivised more cracking heavier natural gas liquids (NGLs) such as propane and butane relative to naphtha, leading to a significant increase in BD production.

Healy noted that even as BD production has increased dramatically in the US with the shift to heavier feedstocks, demand for the product has fallen off by perhaps 20-25% or more, resulting in an oversupplied BD market and subsequent downward pressure on prices.

Healy said that the scale of the supply imbalance in the BD market is sufficient to encourage additional means of placing excess BD such as co-cracking and that some cracker operators have faced constraints in terms of using heavier feedslates because of the difficulties involved in moving additional BD supplies.

BD is used heavily in the automotive sector and the sharp drop in production of motor vehicles and parts has brought about a significant drop-off in BD demand.

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