Chemical Industry Summary
As witnessed by record inventory, the global oversupply of crude oil continues to weigh on expectations for a price recovery in the near term. This is both a supply and a demand-driven problem with consensus expectations indicating that 2016 is highly unlikely to show significant improvement in energy pricing. Companies in the energy sector have taken actions to mitigate significantly softer cash flow including drastically reduced capital outlays and investments. While companies tend to maintain dividends in the short term, a prolonged recovery could further impact cash management strategies. By extension, soft prices for crude are impacting chemical pricing. Global chemical prices have already undergone a significant price adjustment and additional decreases appear imminent.
Macroeconomics and Geopolitics
While the US economy continues to outperform most other geographies, a majority of US economic indicators are softening. In November, the US Manufacturing ISM dropped into contraction territory with a reading of 48.6, the first time this indicator has been in contraction territory (below 50) in 36 months. The October reading of 50.1 was barely in expansion territory. In October, US housing starts were reported at an annualized rate of 1.06 million, down 11.0% from a year ago. The current 2015 forecast for US housing is near 1.1 million average starts, up 10% from 2014. The second estimate for Q3 US GDP was published at 2.1%, down from the Q2 result of 3.9%. In October, the US added 271,000 jobs, a number equal to September and October combined. However, most of these were low-paying seasonal jobs, and losses in the important energy sector are mounting rapidly.
In October, the IMF released the semi-annual update of its view of the global economy. Global GDP growth is projected at 3.1%, down from last year’s result of 3.3% growth. The IMF has brought down its view of 2016 global GDP growth to 3.6% from 3.8%. However, some observers view this forecast as optimistic and predict that actual growth could come in at a sub-3% number.
Europe’s economy continues to gain traction on the heels of stimulus provided by the ECB. In November, the Eurozone’s manufacturing PMI index was 52.8, up from the October reading of 52.3. Manufacturing growth was registered in all regions except Greece. According to the IMF, Europe’s GDP is expected to grow by 1.5% this year, but other forecasts are in the range of 1.5% to 2.0%. China’s GDP growth is forecast at 6.8% in 2015 but is forecasted lower in 2016/2017 at 6.3%/6.0%. Brazil is in a recession with GDP expected to shrink 3% in 2015 and only moderately recover to a range of negative 1.5% to negative 2% in 2016.
Feedstock – Crude Oil
OPEC has concluded its December Vienna meeting with no guidance given for targeted production levels, or a plan to achieve the current target of 31.5 million barrels per day. The January NYMEX futures price for WTI sank to near $37.50 per barrel in mid-day trading on December 7. Global crude oil spot prices have recently softened with WTI trading on a cash basis below $40 per barrel and are now approaching 6-year lows. Recent trends for US crude have not been supportive with inventories over 10% higher than last year. Consensus forecasts predict that oil prices will recover only to the low 50s by year-end 2016anda major consultant is projecting that it will take until 2025 for crude oil prices to recover to US$70/Bbl.
The Paris climate change summit concludes this week with to outlook for verifiable emission reductions looking doubtful. Also unresolved at this time are a host of issues including financial support for poor countries.
Feedstock – Natural Gas & NGLs
US Henry Hub natural gas cash prices in December have continued to trade near US$2.10 per million BTUs. The EIA reports record levels of working inventories for US gas of 3,413 billion SCF, 16% above last year and 8% above the high end of the prior 5-year period. November is a “shoulder” month for demand and prices typically strengthen in the winter months. Current forecasts call for Q1 gas prices around US$2.25/MM BTU. The current NYMEX forward price for December 2016 is near US$2.50/MM BTU. US ethane prices have eased with lower gas prices, with trades currently near US$0.185 per gallon.
In September, US propane/propylene inventories topped 100 million barrels for the first time. Inventories are 23% higher than a year ago. Propane prices are steady in the low 40s and cracking margins based on propane feedstock are advantaged over all other feeds. New US export capacity is expected to come online this December.
The oil-to-gas price ratio has trended near 20:1, with nearly equivalent price declines for both light and heavy feeds. At this level, North American producers continue to be advantaged, but at absolute values significantly below the levels seen in 2013/2014.
US Olefins & Polyolefins
US contract ethylene prices in November settled up 1 cent/lb.to 28.25 cents/lb.on a net transaction price basis. This movement surprised some observers who were expecting flat pricing. Margins for light crackers have expanded slightly due to the ethane softening and modest improvement in ethylene prices. Light feed margins are near US$0.16 to 0.18 per pound, compared to US$0.30/lb to 0.35/lb in mid-2014. For the third quarter, US ethylene production was a quarterly record, at 14.9 billion pounds representing 94% of US capacity, up 8% from a year ago.
After moving up 1.5 cents/lb.in total for October and November, producers have proposed a December increase for contract propylene of up to 1 cents/lb. If achieved, this would bring the chemical grade propylene price to 31 cents/lb., about half of the level of a year ago. Before the last 3 months, contract propylene prices had fallen 10 of the prior 12 months.
November saw a split settlement for US butadiene contract prices, with settlements of down to either 2 cents/lb. or 3 cents/lb., depending on the seller. Nominal contract pricing in November is US$0.29 per pound.
US polyethylene pricing rolled over for the second month in a row in November. PE producers had proposed increases of US$0.05-0.07/lb. in October and November but failed to get traction in the market. Before the recent initiatives, in the August/September period, US contract PE prices declined a cumulative US$0.09 per pound. US producer PE inventories are in reasonable shape and net PE exports have been running 20% ahead of last year and are on pace to be at the highest level in 6 years.
In November, US PP prices were up US$ 1-2 cents/lb. on top of October’s gain of US$ 2-3 cents/lb. Margins in November held steady as the feedstock price increase was pushed through. Homopolymer prices are near US$0.55/lb.
European Olefins & Polyolefins
For December, European the contract ethylene price increased by €23.5/ metric ton (MT) to a level of €927.5/MT. With declining naphtha, margins should improve in the near term. With ethylene prices, down 8% and feedstock running well ahead of this level, cracking spreads have improved considerably from the first of the year. Film grade HDPE is currently USUS$1,290 on a spot basis, down US$310 per MT from peak levels early this summer.
European contract polymer grade propylene settled at €670 per MT in December, flat with November, but down €40 per MT from October. Contract butadiene prices for December settled at€590 per MT, down €35/MT from November. Spot prices for butadiene in Europe peaked in July at over US$1,000 per MT, but are now below US$600/MT.
Asian Olefins & Polyolefins
Spot ethylene prices in Asia have recently strengthened and are approaching US$1,100/MT. This is up 35% from the July low of nearly USUS$800 per MT. This is due primarily to seasonal maintenance outages. The naphtha/ethylene spread has improved to just over US$600/MT, about 50% higher than the US$400-450/MT level seen in July. Helping this spread are naphtha prices that are only modestly over US$400 per MT.
Spot prices for LDPE in Asia are just below US$1,200 per MT, down from over US$1,400 this summer. The current spread for PE/naphtha is over US$700 per MT. Prices for HDPE are currently near US$1,000 per MT, down US$300 per MT from July levels.
Global Chlor-alkali
The Chlorine Institute reported that effective operating rates for the US chloralkali industry were 76% in October, down from 90% recorded in July. Operating rates have been impacted by numerous planned outages. US producers announced a US$65/ short ton (ST) price increase for caustic for the fourth quarter. A prior increase of US$40/ST for the second quarter was only partially successful. ECU margins for the industry remain near trough levels at nearly US$150 per ST.
European chlor-alkali operating rates in October were 75.4% of industry capacity, down 1.4% from last year. Industry-wide inventories of caustic in September were 216 thousand MTs, down 5% from a year ago and down 17% from two years ago as the industry adjusts operating rates to meet reduced demand.
AMERICAS
Pont and Dow Chemical in a talk of a potential merger
According to several news outlets, DuPont and Dow, two US largest chemical giants, have been reportedly in mega-merger talks. Each of these two companies is valued at approximately US$ 60 bn. If the merger materializes, the combined company would become the world’s second-largest chemical firm, only after German-based BASF. The potential merge negotiations have not concluded yet and could still collapse. After the conclusion of the negotiations, Federal Trade Commission would need to endorse the merger.
Comments: Currently, DuPont has six business segments, including Agriculture, Electronics & Communication, Industrial Biosciences, Nutrition & Health, Preformation Materials, and Safety & Protection. The agriculture business unit generates 40% of sales revenues at DuPont. Dow Chemical has its business split into two groups that are labeled as basic chemicals and specialty chemicals. Specialty chemicals are defined as higher margins. If the merger goes ahead, the newly formed company would further break up into three businesses, agriculture, specialty products, and materials, such as plastics. The product overlaps between these two firms are not extensive, which would be complementary to each other. The potential merger is expected to help create cost synergy in terms of R&D, especially in the agriculture segment, and marketing-selling synergy. However, the possible DuPont-Dow deal is also expected to encounter challenges from anti-trust authorities all around the world.
EUROPE
NKNK starts pre-commissioning for revamped LAOs facility
Nizhnekamskneftekhim, known as NKNK, is pre-commissioning its revamped linear alpha olefins (LAOs) facility in Nizhnekasmsk, Russia. The modernization of the LAOs plant will increase capacity by 100% to 37.5KTA, meeting the increasing demand for butene and hexene at its existing polyethylene plant.
Comments: The intent of plant modernization is the production of goods required for manufacturing polyethylene at the existing plant of NKNK and at a Grassroots Olefins Complex. The 1989 commissionedLAO Plant with a designed capacity of 186KTA was purchased from Davy International (Oil and Chemical) LTD (Great Britain) under the license of Ethyl Corporation (USA). Primarily the plant was going to produceС8 -С10products targeted for synthetic oils markets. The outcome of С8 -С18 was 72%. These olefins fractions have limited demand in the domestic market and low external market selling prices. The plant revamp has become necessary due to the startup of a polyethylene plant and the increased demand for butene and hexene, which also aim to increase the profitability of production. The α-Sablin technology was chosen for the existing plant modernization, co-owners of the technology are Linde AG and SABIC.
MOL Group commissions butadiene extraction plant
Hungary-based oil &gas giant MOL has commenced the operation of a butadiene unit with a production capacity of 130KTA. MOL Group also has been working with Japan-based JSR Corporation to build a 60KTA of solution styrene-butadiene rubber (SSBR)plant in Tiszaújváros, Hungary that is scheduled to start up in 2017. The joint ventureSSBR plant will secure feedstock from the newly-built butadiene recovery unit.
Comments: JSR Corporation has benefited from MOL Group’s existing infrastructure in Tiszaújváros and its emergence as a vertically-integrated company with access to both Eastern European and West European markets. While the global tire market is currently oversupplied, there have been significant investments in tire plants in Eastern Europe in the past few years by Korean and Indian manufacturers. The venture allows MOL group to further diversify its product offering into higher-value materials using JSR’s SSBR production technology.
INEOS inks supply agreements with Shell and ExxonMobil for ethane from US shale gas
Swiss giant INEOS has signed an agreement with ExxonMobil and Shell to supply shale gas from the US for ExxonMobil’s Mossmorran, Scotland Fife Ethylene Plant. The purchase agreement will begin in mid-2017 and receive gas from INEOS’ newly-built import terminal in Grangemouth via the existing pipeline between both sites. Shell Chemical has 50% of capacity right at Fife Ethylene Plant.
Comments: Tight feedstock availability for crackers is a big issue for many European petrochemical producers due to the dwindling gas supply from the North Sea. While European shale gas development is still a work in progress, the low-cost and abundant US shale gas has emerged as a viable solution to feedstock shortage. INEOS is building vessels to ship 40,000 barrels of US liquefied shale gas across the Atlantic Ocean for the Scotland crackers. Borealis has invested to upgrade its crackers in Sweden to partially utilize imported natural gas from the United States. SABIC plans to access shale gas for olefin derivatives facility in the United Kingdom. The US Shale gas boom has transformed US manufacturing and now is ready to increase the competitiveness of European gas-fed crackers.
Rosneft, Pirelli, and Synthos move to the next phase of the Russian synthetic rubber project
Rosneft, Synthos, and Pirelli have agreed on the result of the feasibility study for a synthetic rubber plant in Nakhodka as part of the Far Eastern Petrochemical Complex development. They also have signed a memorandum of understanding for the potential creation of a synthetic rubber joint venture between Rosneft and Synthos as well as the implementation of joint R&D between Rosneft and Perilli in tire materials.
Comments: Rosneft is an oil exploration and refinement company primarily owned by the Government of Russia. Rosneft became a leading oil &gas company in Russia after the acquisition of former giant Yukos at auctions. Rosneft has a strategic effort to extend a petrochemical portfolio further downstream from ethylene and propylene through the development of the Far East Petrochemical Company (FEPCO) project. The port city of Nakhodka is located on Nakhodka Bay of the Japan Sea with proximity to China, Japan, and South Korea. The project is intended to leverage the city of Nakhodka’s geographic advantage to high-margin markets in Asia, especially in the automotive segment. FEPCO project will manufacture ethylene, propylene, polypropylene, bimodal HDPE, linear low-density polyethylene, and styrene-butadiene rubber. Rosneft and Mitsui are expected to start up cracker and polyolefin downstream units in 2017. As for the partnership in the synthetic rubber project, Synthos will provide access to feedstock for the production of synthetic rubber, while Pirelli will use all synthetic rubber output at its tire-making plant in South Pacific Region.
MIDDLE EAST & AFRICA
Iran targets early 2016 to start up three petrochemical facilities
According to the Islamic Republic’s oil ministry’s official SNANA news agency report, Iran has three petrochemical projects close to completion with launch targets of March 2016. These projects include phase 2 of the Kavian petrochemical plant, the Takhte Jamshid petrochemical complex, and Lorestan Petrochemical’s LLDPE/HDPE facility. Phase 2 of the Kavian project is to expand ethylene capacity by 1090KTA. The Takhte Jamshid petrochemical project will have a combined capacity of PBR/SBR up to 48KTAandLorestan Petrochemical’s LLDPE/HDPE plant will have a production capacity of 330KTA.
Comments: These projects are among 17 highly prioritized petrochemical projects in Iran which are expected to become operational by the 2016 calendar year-end. Some of the projects will be launched during the early part of 2016 and the rest to be followed by the year’s end. The high-density polyethylene production unit in western Lorestan province and the sulfuric acid production unit in the northwestern city of Urmya are to be launched in the first quarter of 2016. Kavian II, Ammonia and Urea 7 in Marvdasht south of Iran, the MEG production unit in Morvarid Petrochemical Plant, and Mahabad the Polyethylene production unit are other projects which will become operational during the second half of the year. The projects are being developed by an investment of 1.7bneuros and will be ready to process petrochemicals.
ASIA PACIFIC
Shandong Shenda successfully produces a full range of PP products
Followed by a start-up in July of this year, China’s Shandong Shenda Chemical has successfully manufactured a full PP product family with W.R. Grace’s UNIPOLTM technology at the Tengzhou facility. Now, the company can offer a complete PP product portfolio, from homopolymers to high-quality random and high-impact copolymers.
Comments: Shandong Shenda is a coal-based polypropylene subsidiary of Levima Group Co., which was established in 2011 as a chemical division under Legend Holdings. Shandong Shenda produces polypropylene using propylene via methanol-to-olefin technology. China has seen over 1 million tons of new polypropylene capacity coming online this year, most of which are based on the coal-to-olefin/methanol-to-olefin process. Coal-based polypropylene usually is priced lower than naphtha-based polypropylene. New PP supply with lower prices has led to an oversupply of some commodity products such as injection grade, while specialty PP grades still rely on imports. Although China’s economy has been slowing down, the demand for polypropylene is still expected to grow healthily. With oversupply happening in commodity PP grades, it is expected to see more Chinese PP producers in an effort to develop their product portfolio toward premium or specialty grades for profitability.
China’s Shenchi Petrochemical to launch C3/C4dehydrogenation facility soon
Shenchi Petrochemical is expected to soon commence its 400KTA of mixed C3/C4 dehydrogenation plant in Dongying, Shandong, which was originally scheduled for commercial production in July 2015. The plant will produce 200KTA of propylene for the merchant market and 200KTA of isobutylene. The company now is preparing to secure raw materials.
Comments: Shandong Shenchi Petrochemical is a private refiner in North China with a current product portfolio including fuel oils, propylene, isoprene rubber, and butadiene rubber. The setup of the propylene/ isobutylene coproduction units is in response to the increasing consumption of transportation fuel and propylene in the Chinese economy. It is estimated that more than a dozen of on-propose propylene production units via both the DHP process and CTO/MTO technologies are in various stages of construction. Most are expected to start up over the next three years. However, the Chinese propylene market is currently oversupplied due to slowing GDP growth and depressed demand from end-use markets. This upcoming propylene capacity is estimated to pose more downward utilization pressures in the propylene market.
Sumitomo and S-oil ink technology licensing agreement
South Korea-based S-oil has selected Sumitomo’s technology for the production of polypropylene (PP) and propylene oxide (PO). Under the licensing agreement, S-Oil will produce 405KTA of PP and 300KTA of PO with an expected start-up in 2018.
Comments: S-Oil, a Saudi Aramco affiliate in South Korea, is a major oil refiner in this country. The company’s current petrochemical portfolio includes benzene, toluene, xylene, and propylene. Due to sliding crude oil prices and increasing supply from China, India, and the Middle East, S-Oil has strategically invested to expand its refining capacity by 50% and integrate toward further downstream production. Upon completion of the expansion, S-Oil is poised to become a stronger domestic competitor in markets against SK Group and GS Caltex. The SK Group produces PP and PO through SK Chemical, while GS Caltex produces PP. Currently, SK Chemical is the only producer of PO in South Korea and the company is planning to build another 400KTAPO plant using BASF’s technology by 2018.
PTTGC to expand petrochemical capacity worldwide
Thailand’s largest petrochemical producer PTT Global Chemical plans to invest approximately US$ 7.9 bn for expansion in Thailand and the United States over the next five years. The planned investment breakdown: US$5.5 bn for a new shale gas-based ethylene petrochemical complex in Ohio, US$1 bn for the Map Ta Phut retrofit project, US$1.2 bn for propylene oxide (PO)/polyols plant and US$200 million for 300KTAof mLLDPE plant. The US ethylene project and PO/polyols project and mLLDPE facility are expected to start up in 2021, 2019and 2018, respectively; while the Map Ta Phut retrofit project is subject to a final investment decision in 2016.
Comments: One of the key strategies that TPTTGC has deployed in recent years is to reduce external sales and exports of its upstream products, such as naphtha, polypropylene, benzene, and para-xylene. At the same time, integrating toward more downstream production with higher value addition. The Map Ta Phut retrofit project is switching Cracker feedstock from natural gas to naphtha. Currently, about 80% of naphtha produced by PTTGC is sold to its domestic competitor, SCG Group. With an increase in the capacity of naphtha-fed-cracking, PTTGC will be able to reduce external sales of naphtha and develop more downstream petrochemical plants with a wider range of chemical outputs. Both PO/polyols and mLLDPE plants will convert PTTGC’s upstream products into higher-valued downstream products that have growing demand in Thailand and other parts of Asia, especially in China. On the flip side, the planned Ohio petrochemical complexes take advantage of low-cost shale gas in North America to produce HDPE using INEOS’s Inovene S process technology. However, North America will be oversupplied with polyethylene in the coming years. PTTGC is expected to aim the majority of production at exports to Asia.
Sinopec introduces PEgrades with high-value addition
China’s Tianjin Petrochemical, a subsidiary of Sinopec in Tianjin, has successfully developed high value-add grades of polypropylene resin, including PPR-ET02 for thermoforming with ultra-transparency and PPR-BT02 for extrusion blow molding. These two grades are targeted at applications where transparency and high-temperature processability are required such as baby bottles, beverage cups, and sport water bottles. According to testing from converters, finished products made of these two grades are comparable to similar products imported from overseas in terms of appearance quality and tough feel.
Comments: The demand for polypropylene in China has grown dramatically over the past decade. Currently, State-owned giants, such as Sinopec and PetroChina own over 50% of annual ~18,000KT of PP production. However, most of the domestic producers supply general propose PP grades lacking the capacity to develop premium grades. Consequently, China is reliant on imports of special grades, mainly from South Korea, Saudi Arabia, Singapore, and Taiwan. According to China import statistics, China imports approximately 3,500 to 4,000KTA of polypropylene. Developing high value-added PP grades become an option for Chinese producers to open up new market opportunities and differentiate their portfolios toward a higher margin.
PetroChina develops metallocene-catalystic PE
Dushanzi Petrochemical, a subsidiary of PetroChina in Xinjiang province, has commercially produced metallocene-based polyethylene (mLLDPE) grade, EZP2010HA, using its new 375KTA reactor. The new grade targets film applications such as shrink film, overwrap film, heavy-duty bags, and food packaging.
Comments: China’s demand for mLLDPE has grown at almost double-digit for the past five years and the trend is expected to continue for the next five years. However, due to the difficulty and complexity in production in mPE, China heavily relies on imports to meet domestic demand, mainly from Japan, SingaporeandSouth Korea. The huge imbalance of supply/demand for mLLDPE in China has intrigued several Chinese chemical firms to have development programs underway. China now has three producers with the capacity to produce mPE at a commercial scale, including Daqing Petrochemical, Shenyang ChemicalandDushanzi petrochemical. The success of Dushanzi Petrochemical in the production of mPE helps China fill the gap of domestic supply and the blank of related technology.
Fund Energy eyes 2016 to launch MTO unit and PP plant
China’s Fund Energy sets to launch 330KTA of methanol-to-olefin (MTO) plant in Changzhou, China in Q1 2016. The MTO plant will produce 165KTA of ethylene and 165KTA of propylene. The propylene output will be used for captive consumption at 300KTA of PP facility, which is scheduled to come online in Q2 or Q3 2016; while the ethylene will target the merchant market and be sold by pipeline to customers such as Changzhou New Solar Chemical for styrene monomer production.
Comments: Fund Energy was founded in 2010 by a multi-industries company Fund Holding in response to China’s goal to develop non-naphtha-based polyolefin production and is China’sfirst producer of polypropylene using propylene via the MTO process. The growth of PP capacity in China is outpacing the slowing demand growth. The Chinese PP market is currently suffering from oversupply, coupled with depressed end-use market demand. Consequently, PP operatingutilizationratesare lower than 70%. Several PP projects with a total capacity of over 2,000KTA are scheduled to come on-stream in 2016, which could bring more downward utilization pressure to PP producers. PP producers have to either find a way to secure a market share or put an effort to develop premium PP grade segments where reliance on imports is significant.
LyondellBasell to acquire Indian PP compounder
LyondellBasell plans to acquire the polypropylene compounding asset of Zylog Plastalloys for an undisclosed financial figure. The acquisition is expected to finalize in early 2016.
Comments: LyondellBasell has strategically expanded its footprint into India through acquisitions to capitalize on the fast-growing demand for automobiles. India now represents the sixth largest market in automobiles with 3.8 million new vehicles assembled in 2014, followed by China, the US, Japan, Brazil, and Germany. The deal with Zylog Plastalloys, along with the acquisition of SJS Plastiblends early this year, will make LyondellBasell become the third largest PP compounder in India with an annual capacity of 44KT, which is part of an effort to become a leading producer of PP compounds in all major automotive growth regions.
SHALE GAS DEVELOPMENT
Pakistan’s shale gas reserves are higher than the previous expectation
According to a study conducted and released in November of this year by the US Agency for International Development (USAID), Pakistan has proven to have 10,159 trillion cubic feet (TCF) of shale gas resources, of which 200TCF is risk technically recoverable mainly Sindh and southern Punjab. A prior study performed by USEIA in 2013 estimated that Pakistan’s shale gas resource was at 586TCF with 105TCF tipped as risk technically recoverable.
Comments: The success of US shale gas has made nations with shale gas reserves hope to exploit shale gas for future economic growth. Pakistan with a total population of over 180 million only generates approximately 4 billion million cubic feet of gas, which is less than two-thirds of domestic needs. Pakistan currently envisages imported gas as the main source to fill the shortage. The country has several gas-receiving terminals under construction and has been in talks with Iran for a pipeline link to Iran’s undeveloped gas-rich area. Higher-than-expected shale gas reserve gives Pakistan a bright future for domestic gas supply. However, Pakistan needs foreign assistance with the latest technology for tapping difficult-to-reach deposits and producing gas on a large scale. The government currently has policies underway to attract foreign investment for exploiting shale oil and gas. Shale gas development will be a long shot for Pakistan.
BIOBASED
Genomatica, Braskem develop biobased butadiene production at lab scale
Genomatica and Braskem have announced the successful production of butadiene using a direct metabolic pathway, a biobased process at the laboratory scale. These two companies have begun a joint development program for a commercial process for on-purpose, biobased butadiene since 2013. The joint R&D program includes developing microorganisms to drive a metabolic pathway based on continuous production, multiple direct pathways, and novel enzymes.
Comments: High ratios of oil &gas prices through 2013 had led to reduced butadiene supply as petrochemical companies mainly in North America shifted from naphtha to natural gas liquids cracking. Prospective tightness in butadiene caused large petrochemical players to invest in on-purpose butadiene, including biobased butadiene. Genomatica’s partnership with Braskem has identified enzyme pathways in microorganisms that ferment sugar to produce butadiene. Researchers have selected and amplified the highest-yield pathway using engineered strains, achieving consistent lab-scale production. Genomatica’s first successful process, used to manufacture 1,4-butanediol, achieved commercial production in 2012 and has been licensed by BASF and Novamont.