INTERVIEW: Tariffs, EVs could mean good news for US butadiene, TPC CEO says

The growing number of electrified vehicles in the US, paired with tariffs boosting US manufacturing, will help to generate the demand needed to sell increasing volumes of butadiene within North America, the CEO of crude C4 processor TPC Group said.

TPC CEO Ed Dineen told Platts, part of S&P Global Commodity Insights, during this year's AFPM International Petrochemical Conference in San Antonio that after increasing its butadiene capacity in 2023 and 2024, the company is now expecting to increase production itself some 6% in 2025.

"Demand right now is solid and I think with what seems to be going on at the federal level there's going to be even more emphasis on domestic production," he said. "We also continue to see EV production as a driver of butadiene demand because EV tires wear out faster and generally need a higher percentage of synthetic rubber."

Butadiene is used to make synthetic rubbers for a variety of applications, including tires. TPC is one of the four major producers in the US, alongside Shell, ExxonMobil, and LyondellBasell. Unlike its rivals, whom produce the crude C4 from which the butadiene is extracted, TPC purchases the feedstock.

Exports

While a handful of spot butadiene cargoes have been heard to have been fixed from the US Gulf Coast to the Asian market in recent months, Dineen ruled out the viability of exports in the long term.

"As TPC, we don't see ourselves as an exporter," he said. "We believe we're in good position to move all, or a large percentage of, the butadiene into the domestic market. We also see that there may be some new consumers of butadiene derivatives building in the US. Occasionally you have upsets, a customer goes down, you build up some inventory, and perhaps you send it for export."

Crude C4 supply

Early this year, the US supply of crude C4 feedstock became tight as turnarounds impacting ethylene crackers impinged on production, but Dineen expressed confidence that over the coming months and years, TPC's supply of crude C4 will remain healthy thanks to new agreements with suppliers and the ability to take on material by rail, pipeline, and barge.

"We're one of the few that can handle rail, and my sense is our competitors don't like to handle rail, so we've expanded our rail capacity at both our Houston plant and over at the port Neches terminal," he said. He noted that over the coming years, the company will strive to process as much crude C4 as is available.

Dineen added that the company will also be looking for additional supply following the completion of the Golden Triangle polymers plant near Houston, a joint venture between Chevron Phillips and QatarEnergy, which will include an ethylene cracker with a production capacity of 2.08 million mt/year and which is expected to come online within the next few years.

Tariffs, US rubber production

One reason TPC did not see the need for exports longer term, according to Dineen, is that tariffs would boost domestic demand for derivatives like acrylonitrile butadiene styrene plastic, and incentivize more manufacturing on US soil. He added that the company has begun talks with an Asian producer to make final products in the US.

"We have a plant site over in Port Neches that has plenty of room where people could potentially co-locate, right next to a source of butadiene," he said. "We have pipeline capabilities in Houston, pipeline capabilities that go to the customers out in the East Texas, Louisiana area."

He also pointed to new downstream applications for butadiene, including nitrile gloves -- scarce during the pandemic -- which contain nitrile butadiene rubber.

"We feel good right now about where we are as a business," he said. "Demand for butadiene is solid right now and we think that is going to sustain."

MTBE

TPC Group is also one of the four major producers of MTBE, a blending component to increase the octane level of gasoline.

Although the US no longer uses MTBE as a blendstock, it is still produced for export. Both neat MTBE and material already blended into gasoline are typically exported to Mexico and parts of South America, such as Chile.

Dineen dismissed concerns expressed by some in the market that Mexico could impose retaliatory tariffs on the US that would disrupt the flow of MTBE from the US to Mexico.

MTBE spot prices have fallen to all-time lows in recent weeks, trading for parts of March at a rare discount to RBOB. Overall, demand for octanes has appeared tepid for the time of year.

"Margins are not as good as they were a year ago, for sure, but I still think we're going to see a summer blending season," Dineen said. "Mexico is still a big outlet for MTBE and MTBE blended gasoline. We don't think that's going to change and we don't really see tariffs coming in in that area."

Dineen said ultimately TPC is optimistic that MTBE will retain favor as a gasoline blending component in the years to come and that the company's access to cheaper, natural gas-derived feedstocks will place it at a competitive advantage with respect to much of the world.

That said, he noted that the recent ramp-up of the Dangote refinery in Nigeria had led to reduced demand. "Nigeria had been a pretty big consumer of MTBE and that's kind of gone away," he said. "We didn't supply there but we think some of the European barrels that used to go there now have to go somewhere else."

He also said that if Pemex's Olmeca refinery in Mexico comes online, that could also bode poorly for MTBE demand in the longer term. However, the refinery, which was slated to start up in 2024, has no planned start date yet in 2025, and sources have expressed uncertainty about when operations might actually begin.

"[Olmeca] probably would have some something of a negative impact if it came online but I still think there are pretty strong octane needs in the refining world and we will still see MTBE having a home in that world," Dineen said.

"MTBE is a very good blendstock and makes good premium gasoline, so we think that's going to continue."