FGE's detailed assessment of the mid/long-term operating environment for the global butane trade. In this multi-client study, we forecast butane demand and review likely incremental supplies to identify the most crucial factors at play in the butane market.
Asia Pacific continues to drive butane import and demand, with the petrochemical pull from increased steam cracker use in China and South Korea leading the way in demand growth. Elsewhere within the region, the butane-heavy residential and commercial use of LPG as cooking fuel from the populous regions of South Asia and Southeast Asia, dominated by India and Indonesia continues to pull demand imports.
Over in the West, US butane production growth during 2018-2019 was around 13.3%. Ultimately, butane production is a function of crude production in the US, which very much rises and falls in tandem with WTI prices.
Butane demand in the West sees growth particularly in North Africa and Latin America, as their reliance on butane-heavy LPG use in the residential and commercial sector continues.
The major importing economies of India and Indonesia in Asia Pacific will be the main driver of butane imports, as LPG is heavily used as cooking fuel, in the absence of strong competition from natural gas. Additionally, butane-heavy LPG household use in Southeast Asia will contribute to Asia’s pull of global butane molecules.
Besides the growth of butane use in the petrochemical sector in East Asia, butane is increasingly used as gasoline additive. Driven by stringent emission standards to curb air pollution, China is emerging as a key growing market for processed butane as gasoline additives.
Within the petrochemical sector, while growth in cracker demand for LPG has primarily been centred on propane in recent years, rapid growth in propane demand particularly from China in the near term may result in some advantages in butane cracking versus propane cracking. This is something that was observed through the COVID-19 period as demand from the transportation sector plummeted. That said, crackers with butane flexibility, particularly those in France, Germany and Japan, could see increased demand for butane when butane cracking economics swing in favor through the 2020s.