Chemical profile: US maleic anhydride

08 May 2014 17:23 Source:ICIS Chemical Business

Maleic anhydride (MA) is primarily used in the manufacture of unsaturated polyester resins (UPR), which are used in applications such as recreational boats, bathroom fixtures, automobiles, tanks and pipes.

Other outlets for MA include 1,4-butanediol (BDO), tetrahydrofuran (THF) and gamma-butyrolactone.

US MA supply was balanced at the start of 2014 before several unplanned plant outages tightened supply significantly in March and April.

US producer Flint Hills Resources shut down its 50,000 tonne/year Joliet MA plant in Illinois in early March because of wastewater issues.

The facility was down until late April, and remains running at reduced rates. Sources said Flint Hills was forced to put customers on allocation for the duration of the shutdown.

Additionally, LANXESS shut down one line at its 73,000 Baytown plant in Texas from mid-January until early April, and plans to shut down the other line for a catalyst change in May.

These plant outages moved the market from balanced to tight, similar to what happened a year ago.

Import material also remained unattractive during this period, largely because of high shipping costs and overseas material being more expensive because of being based on benzene rather than butane.

Sources said MA demand remains healthy and is slightly higher year on year, owing mostly to the BDO and intermediate segments.

Demand from the UPR market has been largely steady as growth in the US construction market has stagnated in 2014.

Export demand for US MA remains stable, as material continued to have a competitive feedstock advantage compared with Europe.

US May MA prices are expected to roll over, keeping them at 82.7-88.7 cents/lb ($1,823-1,955/tonne) for molten material on an FOB (free on board) basis.

Prices rose for the first time in 2014 in April, mostly on tighter supply in March and April because of the unplanned outages, as well as stable demand and feedstock costs.

Sources said they expect MA prices will slide slightly in June or July, possibly by 1-2 cents/lb, as the supply issue is resolved.

Buyers said that feedstock butane prices should decline in the summer, which would create room for MA prices to come down.

Additionally, buyers said that the recent supply tightness and price increase has allowed producers to build margins, and that the margin increase should be shared with buyers once supply is balanced again.

In Europe, second-quarter MA contract prices have rolled over and increased from the first quarter, depending on starting point. Prices were assessed at €1,770-1,850/tonne FD (free delivered) NWE (northwest Europe).

Suppliers said prices had increased on tighter supply mostly as a result of a planned shutdown at a central European producer in the second half of May. Another reason quoted included a notable lack of imports from the US.

MA is produced commercially by the oxidation of benzene or butane. The butane-based process is considered to have superior economics and is the preferred route used by most producers.

Butane-based MA production can be done by either the fixed-bed or fluidized-bed processes.

The fluid-bed process has some advantages over the fixed-bed route, such as lower air-to-hydrocarbon concentration in the feedstock and no need for premixing. The disadvantages include abrasion of the catalyst, conversion rates and by-product formation.

In the fixed-bed route, air is mixed with superheated butane and fed to a reactor containing a catalyst that consists of vanadium phosphorous oxide supported on silica.

Players in the US MA market expect largely steady pricing, with only minor movements, as contracts typically change once per quarter.

Continued stable demand in the UPR market and steady butane prices are expected to keep prices near current levels, with surges mostly coming from possible supply issues.

Because of the high cost and difficulty of moving material overseas, sources said they do not expect pressure on US producers in the domestic market from overseas sellers.

Butane costs remain the biggest variable going forward, with continued shale gas production expected to lead to longer supply and lower prices.

However, several energy producers have made efforts to start exporting natural gas liquids (NGLs), including butane, which could cause prices to move higher and level the playing field in the global market.

Other long-term issues include the challenge for US MA producers to manage increasing costs due to fuel surcharges, diminishing energy credits from the federal government and continuing issues involving environmental and safety compliance.

By John Dietrich