Material Insights · Understanding the Material World

Butadiene and Ethylene

Butadiene is almost entirely a by-product of ethylene crackers, so its supply follows cracker runs and feed choice rather than tyre demand. A naphtha cracker yields about seven times more butadiene per tonne of ethylene than an ethane cracker, so the shift to cheap shale and Gulf ethane tightened butadiene supply.

Butadiene (chemical) and Ethylene (chemical): 4 relationships.

How they are linked

1. By-product of ethylene cracking

Joint production · Strong · Ethylene crackers make butadiene

Steam cracking for ethylene leaves a crude C4 stream rich in butadiene, which extraction plants separate; no one runs a cracker for butadiene alone.

  • over 96% share of world butadiene from steam cracking, 2022
  • about 80% share of butadiene contained in world crude C4 that has historically been processed

Crackers sell crude C4 to processors that recover the butadiene by extractive distillation. Because about a fifth of the contained butadiene has historically not been processed, more extraction capacity can add some supply without new crackers.

Sources: American Chemistry Council; Chevron Phillips Chemical; Chemical Market Analytics by OPIS

2. Feed slate sets the yield

Joint production · Asymmetric · Lighter feeds cut butadiene per tonne of ethylene

Ethane cracks mostly to ethylene, while naphtha gives a wide spread of co-products, so the feed mix decides how much butadiene comes with each tonne of ethylene.

  • 0.025 butadiene to ethylene ratio, ethane cracking
  • 0.177 butadiene to ethylene ratio, naphtha cracking
  • 8.9% world average butadiene to ethylene ratio, 2022

The move to light feeds began in the Middle East and then spread to North America with shale ethane, so ethylene capacity grew faster than butadiene supply. Chemical Market Analytics forecast in 2023 that the world ratio would rise to about 10.7% by 2040.

Sources: Chemical Market Analytics by OPIS

3. On-purpose butadiene

Substitution · Weak · Dedicated plants fill gaps left by light crackers

When light feeds leave butadiene short, dedicated on-purpose plants can make it from butane or butenes, competing with cracker supply.

  • US$610 to 3,858 per tonne range of butadiene prices between June 2009 and August 2011

In 2013 TPC Group took an on-purpose butadiene project in Texas into engineering, citing the shift to lighter cracker feeds, with start-up targeted for 2016; by 2014 it had teamed up with Honeywell UOP on a plant then due in 2017 or 2018. Prices that swing this widely make dedicated plants hard to finance, and steam cracking still supplied over 96% of world butadiene in 2022.

Sources: Hydrocarbon Processing; CHEManager; American Chemistry Council

4. Co-product credit in cracker margins

Cost and price · Medium · Butadiene value feeds back into feed choice

A naphtha cracker earns credits from butadiene and other co-products that an ethane cracker barely makes, so a high butadiene price improves the economics of heavier feeds against ethane.

  • nearly 70% butadiene content of ethane-based crude C4

Ethane crackers make little crude C4, though what they make is nearly 70% butadiene, while over half of naphtha-based C4 is raffinate. Because supply depends on cracker runs and feed slates as well as rubber demand, butadiene prices can move sharply when either changes.

Sources: Chemical Market Analytics by OPIS

For investors

Key learnings

  1. Butadiene supply depends on ethylene cracker runs and feed choice, so it can be short when rubber demand is strong and long when crackers run hard for ethylene.
  2. Moving from naphtha to ethane cuts butadiene per tonne of ethylene about sevenfold (0.177 to 0.025), which is why light-feed regions became short of butadiene.
  3. On-purpose plants add supply only slowly: projects announced for the shortage slipped, and cracker co-product still supplied over 96% of world butadiene in 2022.

What to track

  • Cracker operating rates and feed slate (ethane versus naphtha): Lower rates or lighter feeds cut butadiene supply (Monthly · company reports, industry consultants)
  • Butadiene price against naphtha and ethylene: A high premium signals tight co-product supply (Weekly · industry price reports)
  • Crude C4 extraction capacity additions: Raise the share of contained butadiene recovered (Quarterly · company announcements)

For policymakers

Key learnings

  1. Butadiene for tyre rubbers comes with ethylene investment: ethane crackers bring little, naphtha or mixed-feed crackers bring more.
  2. Petrochemical plans that favour cheap gas feeds should expect to import butadiene or synthetic rubber for the tyre industry.
  3. About a fifth of the butadiene in world crude C4 has historically not been processed, so extraction units can add some supply without new crackers.

What to track

  • Feedstock mix of planned crackers: Sets future domestic butadiene availability (As announced · Ministry of Chemicals and Fertilizers, company filings)
  • Imports of butadiene and synthetic rubber: Show the gap between cracker co-product supply and rubber demand (Monthly · DGCI&S)

Sources

  1. Overview of 1,3-butadiene: physical and chemical properties, American Chemistry Council
  2. Product stewardship summary: butadiene feedstock (crude C4), Chevron Phillips Chemical
  3. Special focus: crude C4 market overview, Chemical Market Analytics by OPIS (2023)
  4. TPC approves engineering design phase for Texas butadiene expansion, Hydrocarbon Processing (2013)
  5. Honeywell and TPC partner on on-purpose butadiene, CHEManager (2014)