USES

Butanediol (BDO) is a colourless and almost odourless, viscous liquid. This hygroscopic diol is soluble in water, alcohols, esters, ketones, glycol ethers and glycol ether acetates; immiscible in aliphatic and aromatic hydrocarbons and diethylether.

BDO is a chemical intermediate used in the production of polymers, solvents and fine chemicals.

The largest consumer is tetrahydrofuran (THF), used to make polytetramethylene ether glycol (PTMEG), which goes into spandex fibres, urethane elastomers and copolyester ethers. The next largest outlet is polybutylene terephthalate (PBT).

Sizeable quantities of BDO go into the manufacture of gamma-butyrolactone (GBL), which has outlets in electronics and high-performance polymers.

SUPPLY/DEMAND

There is less length in the market compared to the start of 2016, with inventories at a lower level for some sellers after a period of good demand.

Supply has tightened in the US and Asia, which resulted in a two-year-high in Chinese prices recently.

This has been a key talking point, with sentiment that global prices are firming.

The exchange rate has also had an impact, with some importers seeing a substantial squeeze on margins because of the weakened euro against the dollar.

This is even more painful in a market that has had actual price decreases for such a long period.

Demand remains at a steady and reasonable level, with consumption decent across all end-use sectors.

The buyout performance from the automotive sector has increased demand from the downstream polybutylene terephthalate (PBT) market.

With prices at the start of 2017 in Europe lower than in other regions, European producers discussed the opportunity to export material, in pursuit of higher netbacks.

PRICES

After a sustained period of pricing drops, the European BDO prices reached a turning point in 2016, when prices starting to firm.

Prices dropped 27% from April 2014 to April 2016, using the ICIS mid-point, which compressed margins for European producers.

There is a consensus in the market that the bottom has been reached, and this was reflected in the rollover of third-quarter prices in 2016, with quarterly prices in the fourth quarter of 2016 and the first of 2017 increasing.

Despite the increases, producers at the start of 2017 continue to cite compressed margins, with hikes in feedstock prices adding to this.

Rising feedstock prices, good demand and less length in the market are the key trends so far in 2017.

Producers continue to have concerns over profitability, with expectations that higher prices outside the region may add to upward pressure in Europe.

TECHNOLOGY

There are a number of process technologies for the production of BDO. The Reppe process is the traditional method, where acetylene is reacted with formaldehyde.

LyondellBasell uses a three-step conversion of propylene oxide (PO), developed in conjunction with Japan-based Kuraray.

Newer processes use maleic anhydride or n-butane as starting material. UK-based BP Chemicals and German engineering firm Lurgi developed an integrated butane-to-BDO process called the Geminox process, which is employed at International Specialty Products’ plant in Lima, Ohio (formerly owned by BP Chemicals).

The Geminox process combines BP’s process for the catalytic oxidation of butane in air using a fluidized bed with Lurgi’s fixed-bed fatty acid hydrogenation technology.

OUTLOOK

After two years of prices free falling in the European BDO market, prices have finally hit the bottom, with upward pressure dominating talks at the start of 2017.

One producer said its biggest concern for 2017 is industry profitability after years of falling prices.

The outlook for demand is positive with players expecting stable-to-firm demand and continued growth from the automotive sector.

Although the demand increase from the automotive sector is expected to continue at a positive level, many feel it may not be to the extent seen in 2016.

Growth across the EMEA region is expected, with opportunities from the polyester and polyurethane chains.

Supply expectations are mixed, with sellers seeing the market on the snugger side at the start of 2017, whereas buyers see the overall supply level as healthy.

The weakened euro against the dollar exchange rate could draw material away from Europe, with exports to dollar-based regions more attractive because of this.

With more balanced fundamentals and growth expected for demand, the Europe BDO market may have reached a turning point with upward pressure for the start of 2017.