VINACHEM

US butadiene (BD) production is expected to grow in 2019 as new ethylene capacity increases availability of feedstock crude C4 (CC4).

Lengthening BD supply should keep prices lower after a period of increases through 2018, creating opportunities for growth in derivative markets and potentially for exports.

Several new crackers are starting production in late 2018 or early 2019, including an Indorama unit, a Sasol unit and a Shin-Etsu unit. Several more are expected to start up later in 2019.

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

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 crude C4 as it becomes available.

Additional BD production as a result of cracker start-ups will shift the market from a historical position of tightness.

Supplies of US BD tightened in 2018 because of cracker turnarounds and lack of CC4 imports early in the year and then as CC4 availability was limited amid increased usage of ethane feedstocks later in the year.

As new crackers came online in March and July, ethylene supply lengthened and ethylene prices plummeted.

The low ethylene prices narrowed cracker margins, prompting the utilisation of more ethane, as it is the most economical feedstock for ethylene production.

Strong crude oil values during much of 2018 had supported prices for heavier feedstocks like naphtha, propane and butane, which often made the heavier feedstocks uneconomical.

The share of ethane in the US feedslate rose above 75% by mid-2018, up from the 60s% in the prior year.

The narrow margins also prompted slower operating rates, and two crackers were shut during 2018 for economic reasons.

The limited CC4 production during much of the second half of 2018 led to supply tightness for BD.

Combined with strong demand from the downstream construction sector, this pushed US BD prices up by more than 30 cents/lb during the first half of 2018 and kept prices supported during the third quarter.

US BD prices began to fall in November, as improved production and lower demand increased the downward pressure from lower global prices.

The narrow margins also prompted slower operating rates, and two crackers were shut during 2018 for economic reasons.

The limited CC4 production during much of the second half of 2018 led to supply tightness for BD.

Combined with strong demand from the downstream construction sector, this pushed US BD prices up by more than 30 cents/lb during the first half of 2018 and kept prices supported during the third quarter.

US BD prices began to fall in November, as improved production and lower demand increased the downward pressure from lower global prices. - ICIS -