The Urethane Blog

Butanediol Overview

US BDO facing perfect storm of supply constraints

Author: Antoinette Smith


HOUSTON (ICIS)–Although US butanediol (BDO) plants in Louisiana and Ohio were not mechanically affected by the winter storm that idled most chemical production in the US Gulf, feedstock availability could curtail production.

No issues were reported for BASF and Ashland BDO production as a result of the arctic blast.

But the storm caused LyondellBasell to declare force majeure for feedstock propylene oxide (PO) and derivatives – including BDO – produced at its Texas site, further tightening North American supply.

In addition, the market has only recently begun to feel the effects of the late-2020 closure of the Lycra (Shandong Ruyi) BDO plant in Texas.

Ahead of Q2 contract discussions, BASF nominated price increases of 30-40 cent/lb ($661-882/tonne) for BDO and derivatives, effective 1 March or as contracts permit.

In coming weeks, BDO plants could face additional constraints as feedstock suppliers – particularly in Texas – remain offline.

Chemical plants throughout Texas and southwestern Louisiana experienced power outages, limited water supply and damaged pipes due to the freezing temperatures.

It is yet unknown how long it will take for feedstock suppliers to return online.

BDO can be produced via several routes – using methanol, PO or maleic anhydride (MA).

Even before the winter storm shut down US Gulf refineries, feedstock propylene was in short supply, driving spot prices to near record levels.

Then, on 22 February spot polymer-grade propylene (PGP) traded at a record 125 cents/lb, compared to the previous trade of 98 cents/lb two weeks before.

Although the storm’s impact on US methanol feedstock was not yet fully established, several Texas producers remain idled.

MA production was not significantly impacted by the storm, as most plants are outside the area.

An MA producer was heard to be conducting maintenance, but this could not be widely confirmed.

In China, February BDO prices more than doubled from January, on tight availability and strong consumption following the Lunar New Year holiday.

In H2 January, the Chinese government urged citizens to refrain from travelling back to hometowns for the holiday, to help limit the spread of the coronavirus.

As a result, more factories operated through the holidays compared to previous years, increasing demand for raw materials.

The increased consumption and tight supply in that region make imports into the US to fill current gaps unlikely.

Europe supply is tight as well, with LyondellBasell declaring force majeure on PO and derivatives from its Rotterdam plant due to a mechanical issue.

Amid the dearth of BDO and derivatives, downstream producers are struggling to feed their plants.

Even before the storm, supply of downstream polytetrahydrofuran – produced with BDO derivative tetrahydrofuran (THF), and known as PTMEG – was insufficient to meet demand.

A government contract involving PTMEG has required precedence over contract customers, according to market sources.

At least one US downstream plant may be idled as a result of the low BDO supply, according to a buyer.

In both the US and Europe, polybutylene terephthalate (PBT) production also has been curtailed as a result of low feedstock BDO availability.

US downstream polyester polyol demand has been strong in recent months on persistent strength in residential construction.

Supply levels were tight in polyols even prior to the winter storm, amid consistently healthy demand and production and logistics issues facing key feedstock markets.

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

US BDO producers include Ashland, BASF and LyondellBasell.

Focus article by Antoinette Smith