By THOMAS BLACK and JACK KASKEY
The shale boom that has boosted US natural gas supplies is
causing an unintended shortage of a key petrochemical
used to make
synthetic rubber for tires.
Manufacturing giants Honeywell International and BASF are
touting rival solutions.
Butadiene, which the US discovered could be turned into a
rubber substitute during World War II after Asian supplies
were cut off, is a byproduct of making plastics from
oil-based naphtha. Shortages loom as plastics manufacturers
switch their feedstock
to less expensive
ethane, a natural gas liquid which yields little butadiene.
That could lead to higher prices for motorists as tire makers
pass along cost increases. The shale boom responsible for the
problem may also provide the solution as Honeywell, in
partnership with TPC Group, and BASF working with Linde, race
to develop technology to produce butadiene from butane, a now
plentiful natural gas liquid.
Whenever there is a gap that opens up in the petrochemical
world, people are
going to throw capital and technology
at it until they solve
it, John Roberts, a New York-based chemical industry
analyst at UBS Securities, said in an interview.
The butadiene shortfall may be as little as 7% over the next
decade if the industry shift to gas feedstock
s is limited to North
America, or as much as 27% if Europe
and Asia embrace the trend,
according to Honeywell.
Houston-based TPC Group, which plans to build a plant in 2017
or 2018 to produce butadiene by on-purpose production instead
of capturing it as a byproduct, brought on Honeywell to
update technology it hasnt used since the 1980s,
according to chief financial officer Miguel Desdin. The
company was acquired in 2012 by a consortium led by SK
In the medium and longer term, if demand picks up
theres going to be a significant shortage of butadiene
because the supply has tightened, Desdin said in an
When butadiene doubled in 2011, tire makers tried to recoup
lost margins by raising prices. Higher raw material costs
eroded earnings at tire maker Michelin & Cie by an
estimated 1.8 billion euros ($2.44 billion) that year and 500
million euros in 2012. Michelin in November said its
researching butadiene production from plant materials in
anticipation that shortages will return.
Honeywell and TPC plan to have technology
production of butadiene ready by year end and are already
talking with potential licensees, Jim Rekoske, petrochemical
global business director for Honeywells UOP unit, said
in a telephone interview. Demand could require as many as 20
to 30 plants worldwide, the companies said.
Gas has become cheaper as hydraulic fracturing or fracking
has boosted production from shale formations. The shale boom
has spurred plans for a record $113 billion in chemical
manufacturing investments, according to the American
BASF and companies such as Dow Chemical and Westlake Chemical
are converting US factories that make chemicals from naphtha
into ones that use lighter feedstock
such as ethane. New
factories planned by Dow and other companies will use ethane,
constraining butadiene supplies.
While ethane and naphtha both yield ethylene, the most common
, ethane yields only
about 14% of the butadiene that comes from naphtha
processing. Ethane also yields less propylene and benzene.
Petrologistics is producing propylene, used to make paints,
carpets and plastic bottle caps, from butane at its plant in
Houston. At least six more plants are planned by Dow
Chemical, Enterprise Products and others. BASF plans to make
propylene from methane.
Honeywells UOP unit has seen explosive growth in demand
for propylene. It has licensed its technology for 22
propylene plants since 2011 after winning only 13 in the
previous two decades, Rekoske said.
Honeywell UOP and TPC are ahead of their chief rivals, BASF
and Linde, in bringing on-purpose butadiene to market. The
German companies announced on June 3 that they will develop
their process in a pilot plant in Ludwigshafen, Germany. They
also plan to license their technology, though its too
early to say when it will be commercially available,
according to Silvia Mueller, a BASF spokeswoman.
We are optimistic that we can offer a new best-in-class
technology for the manufacturing of on-purpose butadiene to
help producers meet the increasing global demand,
Butadiene prices climbed to $1,499/ton in April from $1,190
in December, according to Nexant data compiled by
Bloomberg. Butadiene has fluctuated in recent years,
rising to $3,858 in August 2011 and falling as low as $610 in
About 60% of the rubber used in the tire industry is
synthetic, Clermont Ferrand, France-based Michelin said on
its website. Synthetic rubber is best for high-grip tires,
improves longevity and decreases rolling resistance,
according to Michelin.
Several Chinese plants are being built for on-purpose
butadiene production, two of which are expected to begin
operations this year, Rekoske said. Those plants are using
technology that hasnt been proven, he added.
We feel very confident that our technology
superior, Rekoske said.