Butadiene prices have skyrocketed

By Dave Hannon -- Purchasing, 5/14/2008 9:59:00 AM

Butadiene prices in the U.S. and around the world have tracked crude oil tags to new highs in 2008. According to Purchasingdata.com, butadiene jumped to 76¢/lb in April, up a full 11¢ from the previous month and up 18¢ this year. (And now there are reports of Gulf Coast sales in early May as high as 87¢ “amid firm demand and scarce supply,” says online newsletter ICISpricing.com.)

The increase in butadiene prices is also driving up prices of downstream materials that use butadiene, most notably synthetic rubber. Dow Chemical cited higher butadiene prices in its increasing prices for emulsion polymers for paper and paperboard in North America in April, as well synthetic rubber prices. Synthetic rubber maker Lanxess also increased its synthetic rubber prices worldwide in April, citing increased materials costs.

One reason for the recent price inflation in butadiene can be traced to the chemical coming mostly as a co-product of the steam-cracking processes that produce ethylene and other olefins. Recently, “we’ve seen a strong move” in North America toward steam cracking feedstocks that produce less butadiene, analyst Bill Hyde at Houston-based Chemical Market Associates tells Purchasing.com.

Ethylene cracker operating rates in Asia have been on the downswing due to high feedstock costs, leaving less butadiene available for export. The net result is that there is not enough butadiene to go around in North America. The shortage has caused “record high” prices of butadiene, says Hyde.

Another factor, according to a review of government trade data, is slightly down imports in the first quarter versus higher exports to take advantage of the weaker dollar. U.S. International Trade Commission statistics show that three-month imports were 217,993 metric tons, slightly down from 218,574 in the same period of 2007. Exports in the first quarter totaled 33,540 metric tons, up by 22% from 27,460 in 2007.