30-Jan-2003 -

CMAI Has Completed the 2003 World Butylenes/MTBE Analysis

CMAI, Chemical Market Associates, Inc., recently completed a new C4 Olefins study, the 2003 World Butylenes/MTBE Analysis, consisting of analyses and forecasts for MTBE, butene-1, contained isobutylenes, and contained normal butylenes. This study provides detailed analysis and information on butylenes that is essential for business managers to make informed decisions for the years ahead. Focusing on eleven years, 1997-2007, this market review contains information related to technologies, derivative demand, price forecasts, trade, and production/consumption for butylenes throughout the world. It thoroughly reviews each of the ten major regions which produce/consume butylenes. Additional analysis of other related C4 olefins can be found in the 2003 World Butadiene Analysis, a companion study to the 2003 World Butylenes/MTBE Analysis.

The world's butylenes markets have undergone significant changes during the last 10 years and will continue to evolve in the future. The consumption of MTBE, an important component of motor gasoline, is on the verge of being phased-out in the U.S. This will cause a major shift in the disposition and pricing of butylene streams throughout the world.

MTBE use was mandated into U.S. automobile gasoline in the early-1990s. Due to leaking storage & distribution systems, MTBE contamination of water supplies has been discovered, causing the state of California to completely ban MTBE by the end of 2003 with other states proposing similar legislation. The U.S. Congress is currently debating bills that will likely ban MTBE throughout the U.S. by 2007-2008. Refiners will replace MTBE in gasoline with ethanol, alkylate, iso-octane, and reformate. Some MTBE plants will be shutdown and some will be converted to iso-octane or alkylation in order to consume the excess isobutylenes no longer consumed for MTBE.

The markets and associated technologies that are developing to become significant forces in the butylenes markets include iso-octane and alkylation to replace MTBE, isobutylene conversion to polyisobutylene, butene-1 for polyethylene co-monomer, metathesis to make propylene, and dimerization to make octene for conversion to isononyl alcohol for DINP plasticizers. Since most butylenes are by-products of ethylene in steam crackers or gasoline in refinery FCC units, the optimal valuations and dispositions of these streams are very important to maximize profitability from these major assets.

In 2002, 87 percent of global demand for contained isobutylene came from use in the production of MTBE. Isobutylene was also used significantly in the production of high purity isobutylene, methyl methacrylate, and polyisobutylene. Production of contained isobutylene is forecast to decline at an average annual rate of 0.7 percent from 2002-2007. However, production of contained isobutylene by dehydrogenation of isobutane (the highest cost supply) will decline by 11.8 percent on an average annual basis during this period, mainly due to the anticipated phase out of MTBE in the United States.

In 2002, 40 percent of global demand for contained normal butylenes came from use in the production of secondary butyl alcohol/methyl ethyl ketone (SBA/MEK). Normal butylene was also used significantly in butadiene production by the Houdry dehydrogenation process and butene-1 production by extractive distillation. Contained normal butylenes production is forecast to decline at an average annual rate of 6.8 percent from 2002-2007 and will be led by declines in its production as by-product from MTBE plants based on refinery FCC feedstock.

Butene-1 demand is expected to increase at an average annual rate of 6.6 percent and operating rates will increase from 60 percent of nameplate capacity in 2002 to 80 percent in 2007. Pricing is forecast to drift down from today's levels as butene-1 competes for the market share with hexene-1 and octene-1. Butene-1 will remain the lowest cost co-monomer for polyethylene production throughout the period.

New for 2003, clients to the 2003 World Butylenes/MTBE Analysis have access to CMAI's on-line capacity database. Clients will have the ability to view, download and manipulate the most up-to-date capacity data into a spreadsheet format from CMAI's web site at www.cmaiglobal.com for the products covered within the Analysis. The following report types are available on- line: product capacity, capacity integration, top lists (by producer and consumer), and expansions/closures. Clients will also have on-line access to the study.