Cheap gas is causing tire shortage
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12-15-2015, 02:21 AM
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Cheap gas is causing tire shortage
CHEAP GAS IS CAUSING TIRE SHORTAGE
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Tire Raw-Material Shortage Triggers Race for Answer
Thomas Black and Jack Kaskey
June 12, 2014 — 10:48 AM EDT
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LONG BEACH, CA - MARCH 06: Pumps draw petroleum from oil wells near homes at sunrise as the cost of crude oil tops $104 per barrel in its surge to new record high prices on March 6, 2008 in the city of Signal Hill near Long Beach, California. The cost of crude has California drivers paying more than ever. Statewide gas prices are now 58 cents a gallon higher than the same time last year. (Photo by David McNew/Getty Images)
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The shale boom that has boosted U.S. natural gas supplies is causing an unintended shortage of a key petrochemical used to make synthetic rubber for tires.
Manufacturing giants Honeywell International Inc. and BASF SE are touting rival solutions.
Butadiene, which the U.S. 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 Inc., and BASF working with Linde AG 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 LL, said in an interview.
The butadiene shortfall may be as little as 7 percent over the next decade if the industry shift to gas feedstocks is limited to North America, or as much as 27 percent if Europe and Asia embrace the trend, according to Honeywell.
Significant Shortages
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 hasn’t used since the 1980s, according to Chief Financial Officer Miguel Desdin. The company was acquired in 2012 by a consortium led by SK Capital Partners LP.
“In the medium and longer term, if demand picks up there’s going to be a significant shortage of butadiene because the supply has tightened,” Desdin said in an interview.
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 it’s researching butadiene production from plant materials in anticipation that shortages will return.
Honeywell and TPC plan to have technology for on-purpose production of butadiene ready by year end and are already talking with potential licensees, Jim Rekoske, petrochemical global business director for Honeywell’s UOP unit, said in a telephone interview. Demand could require as many as 20 to 30 plants worldwide, the companies said.
Honeywell’s UOP unit is the exclusive licensor of the technology, called OXO-D, the Morris Township, New Jersey-based company said in a statement today. The process can also convert excess butenes from oil refineries into butadiene.
Shale Boom
Gas has become cheaper as hydraulic fracturing or fracking boosts production from shale formations. The shale boom has spurred plans for a record $113 billion in chemical manufacturing investments, according to the American Chemistry Council.
BASF and companies such as Dow Chemical Co. and Westlake Chemical Corp. are converting U.S. 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 petrochemical, ethane yields only about 14 percent of the butadiene that comes from naphtha processing. Ethane also yields less propylene and benzene.
Petrologistics LP is producing propylene, used to make paints, carpets and plastic bottle caps, from propane at its plant in Houston. At least six more plants are planned by Dow Chemical, Enterprise Products Partners Inc. and others. BASF plans to make propylene from methane.
Explosive Growth
Honeywell’s 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 it’s 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,” Mueller said.
High-Grip Tires
Butadiene prices climbed to $1,499 per metric ton in April from $1,190 in December, according to Nexant Inc. data compiled by Bloomberg. Butadiene has fluctuated in recent years, rising to $3,858 in August 2011 and falling as low as $610 in June 2009.
About 60 percent 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 hasn’t been proven, he added.
“We feel very confident that our technology is economically superior,” Rekoske said.
Read:
Share on LinkedInShare on RedditShare on Google+E-mail
Search
WATCH LISTEN
Tire Raw-Material Shortage Triggers Race for Answer
Thomas Black and Jack Kaskey
June 12, 2014 — 10:48 AM EDT
Share on FacebookShare on Twitter
Don't Miss Out — Follow Bloomberg On
Facebook Twitter Instagram YouTube
Recommended
LONG BEACH, CA - MARCH 06: Pumps draw petroleum from oil wells near homes at sunrise as the cost of crude oil tops $104 per barrel in its surge to new record high prices on March 6, 2008 in the city of Signal Hill near Long Beach, California. The cost of crude has California drivers paying more than ever. Statewide gas prices are now 58 cents a gallon higher than the same time last year. (Photo by David McNew/Getty Images)
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The Ivanpah Solar Electric Generating System sits in the desert on March 10, 2014 in the Mojave Desert in California near Primm, Nevada. Ivanpah is the largest solar thermal tower system in the world. Photographer: Jacob Kepler/Bloomberg
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Share on Facebook
Share on Twitter
The shale boom that has boosted U.S. natural gas supplies is causing an unintended shortage of a key petrochemical used to make synthetic rubber for tires.
Manufacturing giants Honeywell International Inc. and BASF SE are touting rival solutions.
Butadiene, which the U.S. 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 Inc., and BASF working with Linde AG 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 LL, said in an interview.
The butadiene shortfall may be as little as 7 percent over the next decade if the industry shift to gas feedstocks is limited to North America, or as much as 27 percent if Europe and Asia embrace the trend, according to Honeywell.
Significant Shortages
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 hasn’t used since the 1980s, according to Chief Financial Officer Miguel Desdin. The company was acquired in 2012 by a consortium led by SK Capital Partners LP.
“In the medium and longer term, if demand picks up there’s going to be a significant shortage of butadiene because the supply has tightened,” Desdin said in an interview.
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 it’s researching butadiene production from plant materials in anticipation that shortages will return.
Honeywell and TPC plan to have technology for on-purpose production of butadiene ready by year end and are already talking with potential licensees, Jim Rekoske, petrochemical global business director for Honeywell’s UOP unit, said in a telephone interview. Demand could require as many as 20 to 30 plants worldwide, the companies said.
Honeywell’s UOP unit is the exclusive licensor of the technology, called OXO-D, the Morris Township, New Jersey-based company said in a statement today. The process can also convert excess butenes from oil refineries into butadiene.
Shale Boom
Gas has become cheaper as hydraulic fracturing or fracking boosts production from shale formations. The shale boom has spurred plans for a record $113 billion in chemical manufacturing investments, according to the American Chemistry Council.
BASF and companies such as Dow Chemical Co. and Westlake Chemical Corp. are converting U.S. 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 petrochemical, ethane yields only about 14 percent of the butadiene that comes from naphtha processing. Ethane also yields less propylene and benzene.
Petrologistics LP is producing propylene, used to make paints, carpets and plastic bottle caps, from propane at its plant in Houston. At least six more plants are planned by Dow Chemical, Enterprise Products Partners Inc. and others. BASF plans to make propylene from methane.
Explosive Growth
Honeywell’s 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 it’s 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,” Mueller said.
High-Grip Tires
Butadiene prices climbed to $1,499 per metric ton in April from $1,190 in December, according to Nexant Inc. data compiled by Bloomberg. Butadiene has fluctuated in recent years, rising to $3,858 in August 2011 and falling as low as $610 in June 2009.
About 60 percent 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 hasn’t been proven, he added.
“We feel very confident that our technology is economically superior,” Rekoske said.
#3
12-15-2015, 11:48 AM
Haha Classic.
The future is here. Not sure if youve read but 10 states lncluding CA. and 15 countries have pleged to outlaw new gas combustion engines starting in 2050. I think it will happen sooner especially in cities and a few countries. I believe these motors may prove to be the last of an era. Enjoy that TT while you can!
The future is here. Not sure if youve read but 10 states lncluding CA. and 15 countries have pleged to outlaw new gas combustion engines starting in 2050. I think it will happen sooner especially in cities and a few countries. I believe these motors may prove to be the last of an era. Enjoy that TT while you can!
