Butadiene Market Executive Summary
At a global level, the butadiene demand has grown lower than the world GDP growth. The growth of Butadiene market is closely tied to the health of automotive industry as tires are the major end user of butadiene. Most of the butadiene is produced a by-product/co-product and various other factors including the production of ethylene and demand from other end-use industries cause a change in butadiene trade dynamics. Crude C4 supply patterns are somewhat different between various regions and countries. In Asia, and Europe naphtha is the most common feedstock while in North America, steam cracker feed slates can vary depending on relative production economics. Over 95 percent of the butadiene is produced as a by product of ethylene production from steam crackers and recovered via extractive distillation. In certain parts of the world, there are still some production units based on on-purpose routes and this is expected to grow in the long-term forecast.
The supply of mixed C4s and butadiene is not driven by its consumption but also the consumption and production of olefins as butadiene is mostly a co-product. Historically the butadiene market was either oversupplied or under-supplied. The market has never been balanced. During a situation of deficit, butadiene is mostly extracted from the C4sproduced by the steam cracker while during ample supply, producers use different mechanisms for processing C4s with associated values without producing Butadiene. This trend of not so balanced market will continue in the forecast period though the market will approach ton early balance scenario.
As most of the global butadiene is produced by extracting it from crude C4s which are produced as a result of cracking heavy feedstock such as naphtha. As the crackers are shifting towards lighter feedstocks it is believed that the butadiene production from ethylene co-productions will become insufficient which will led to an increase in on-purpose butadiene production. This will most likely push the butadiene prices upwards as more on-purpose butadiene capacities come on-stream.
In the last 5 years, On account of the shale gas advantage, the crackers in the US have switched to lighter natural gas-based feedstocks leading to a decline in C4 production. In China, new-purpose butadiene production through the oxy-dehydrogenation process are likely to come up on a commercial scale. Hence during the forecast period, on-purpose technologies are expected to be important though its economics are higher in the current scenario.
The global automotive industry has fully recovered from the economic recession of 2008 -2009 and the sales and profit have been higher than the pre-crisis level right from 2012 onwards. The major drivers of the butadiene industry include an increase in the automotive and tyre industry.
There has been a shift in the automotive industries and markets from Western Europe and USA to Asia-Pacific.
China, India, and South Korea are expected to witness strong growth in the automotive sector which will drive the demand for butadiene derivatives.
Strong automotive sales in North America and Asia-Pacific countries like China and along with increased demand for electric vehicles are expected to be key demand drivers for butadiene derivatives.
In 2018, SBR applications constituted the largest demand for butadiene accounting for nearly 29% of the total demand followed by PBR accounting for around 24% of the total demand. ABS end-use together accounted for about 15.7%. All other applications including adiponitrile, nitrile &polychloroprene elastomers, and others constituted between 5% to 8% each of the total demand.
Global Butadiene Demand, by Region - 2018 (12296.5 Kilo Tons)
The total butadiene demand in North America has been estimated to around 2084.3 kilotons and has grown from 2028.3 kilo tons in 2014. The average operating in the last 5 years in the country has averaged around 59%. In the forecast period operating rates are likely to slightly increase to 62% as a large number of capacities are added in the USA. In 2008 and 2009 the region was affected by the economic downturn, causing the demand to contract and only to recover in 2010. The regional butadiene demand is anticipated to increase by a CAGR of 1.5% in the forecasted years till 2025.
The total butadiene demand in Western Europe has been estimated to be around 1884.7kilo tons and has grown from 1727.8 kilo tons in 2014. Amongst the major end-use applications of butadiene, PBR accounts for a share of around 23% followed by SB latex and SBR at 22% and 16% respectively. The operating rate in the last 4 years in the country has averaged to 74.3%. In the forecast period operating rates are likely to remain in the same range. No new butadiene capacities are expected to come up in the region in the long-term forecast till 2025. Historically Western Europe is a major exporter of butadiene to the world. It is expected to follow the same trend in the future but with some decline in export as other regions bring on new butadiene capacities.
The total butadiene demand in Central & Eastern Europe has been estimated to around 982.7 kilotons and has grown from 782.7 kilo tons in 2014. Amongst the major end-use applications, SBR accounts for a share of around 52% followed by Nitrile and polychloroprene elastomers. ABS end-use accounts for around 2% share while all other applications including SB Latex account for the remaining share of 9%. The operating in the last 5 years in the region has averaged around 68%. In the forecast period operating rates are likely to increase to 73% as the regional demand increases.
The regional butadiene demand in Asia-Pacific has been estimated to grow at a CAGR of 2.8% during the forecast period. Most of the demand for butadiene in the region will be for SBR, PBR, and ABS. The butadiene market is estimated to be around 6882.9 kilo tons and has grown from 5963.9 kilo tons in 2014. The average operating rate in the last 5 years in the country has averaged around 69%. The announced capacity additions in the region are not sufficient to meet the demand growth owing to the high consumption of butadiene derivatives in China and India. The region will continue to depend on imports. The average net imports during the forecast period will be 795.1 kilo tons.
Global Butadiene Demand, by Application – 2018 (12296.5 Kilo Tons)
The total butadiene demand in Central & South America has been estimated to around 207.2 kilotons and has grown from 200.7-kilo tons in 2014. Amongst the major applications of Butadiene in the region, SBR is the biggest accounting for around 42% while PBR accounts for a share of around 23% followed by SB Latex at 21%. The operating in the last 5 years in the region has averaged around 69%. In the forecast period operating rates are likely to decrease to 67%.
The Middle Eastern & African region has emerged to be one of the largest supplier butadiene globally, benefiting from the low-cost feedstock and proximity to large markets like Asia and Western Europe. The total butadiene demand in the Middle East &Africa has been estimated to around 254.4 kilotons and has grown from 144.5kilo tons in 2014. Further, it is forecast to grow at a CAGR of 2.7%.
With the addition of new capacities(almost 715 kilo tons by 2025), the utilisation rates may take a dip during the forecast period. The imposition of tariff and the current trade war between China and USA may cause some uncertainty for the local ethylene/polyethylene/ other plastic producers as this provides some advantage to other region producers who have better logistics, distribution networks, and bases in many of the nearby Asian countries. China is by far the largest polyethylene consuming country in the world. Going forward China will eclipse all other exporting regions in volume and any change in China’s demand will most likely have a ripple effect on global markets and lead to volatility to USA export volumes.
China accounts for around 28% of the global butadiene demand and 48% of Asia-Pacific demand. The total butadiene capacity in China is expected to increase from 4463 kilo tons in 2018 to around 5063 kilo tons by 2025, to decrease its import dependence in the long-term forecast. The butadiene market in China has grown from 2927 kilo tons in 2014 to around 3408 kilo tons in 2018. China is expected to drive the global butadiene demand as most of the major industries where butadiene derivatives are consumed have been growing in the country
The major drivers include the tightening of the emission standard in the automotive industry and Growing purchasing power in the developing economies, Unexplored opportunities for replacing metals in automotive applications are expected to drive the automotive composites market. The global tightening of environmental regulations in the automotive sector to improve fuel mileage, control emission and reduce fuel permeation is expected to increase the demand for engineering plastics and Composites. Growth in the production of automobiles and initiatives taken by original equipment manufacturers to reduce the weight of the vehicles will further, drive the demand for automotive composites in the long-term forecast.
The recent trade war and tariffs imposed by the USA and China on each other is likely to cause some uncertainties as the huge capacity additions in the USA mostly of which are export-oriented will be destined to China. China imposed a 25% tariff on US HDPE and LLDPE in August 2018 which led to a sharp decrease in US polyethylene exports to China. Further increase in finished goods from current10% to 25% is expected by Q1 end 2019. The plants will be coming on-stream and in phases, any major change in tariffs and demand growth patterns of China will cause a major imbalance not only for the USA polyethylene market but also for the global market. The Chinese market is estimated to be the most important polyethylene market for US polyethylene producers. This may impact the Ethylene production and thereby also affecting butadiene economics.
The predictions of an expected recession that may impact mostly the US and Europe will impact some of the capacities for which a financial investment decision is yet to be taken may experience a delay.
The primary driver for the growth in demand of olefins/polyolefins in Asia has been the migration of labor-intensive downstream conversion industries from developed high labor cost regions like North America and Western Europe, apart from burgeoning population growth and increasing living standards, both of which are driving growth in domestic demand for consumer products also. The strong growth in Automotive, electrical & electronic and consumer appliances is likely to push the demand growth.
Global Butadiene Trade Analysis (2017-2025)
Overview of Butadiene Regional Net Trade
The total trade of butadiene in 2017 was about 2700 kilotons with Asia being the largest net importer of the product. North America is expected to change its trade status from being a net importer till 2021 to one of the largest net exporter from 2021. In the long term forecast, due to no addition of any planned/speculative capacities, the overall reliance on imports from the Western European region will decline by 2025. The Western region will continue to be a net exporter in the long-term forecast. Central & Eastern Europe has been a small net importer of butadiene though the import volumes have increased in the past few years as the demand increased on the back of end-use applications. In the coming years with some new capacities or expansion, the region is likely to change its status to a net exporter. Middle East & Africa has historically been a net exporter of Butadiene and will continue to be so in the forecast period between 2019 and 2025.
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