01 April 2011 14:29 [Source: ICIS news]
LONDON (ICIS)--European spot butadiene (BD) prices are rocketing because of strong demand in an extremely tight global marketplace, market sources said on Friday.
Spot export prices were being pegged from €2,000/tonne ($2,857/tonne) to as much as €2,200/tonne FOB (free on board) ARA (Amsterdam, Rotterdam, Antwerp), well above the April monthly contract price (MCP) settlement of €1,690/tonne FD (free delivered) NWE (northwest Europe).
Three European BD producers said that despite traders offering these prices, low inventory levels and strong incremental demand from domestic contract consumers meant that free volumes were virtually non-existent.
One trader said: “We’ve tried to buy at that level [€2,000/tonne plus], but no luck so far.”
“That is what I am happy to pay,” another trader said.
Technical problems at two sites in Germany are impacting on a market that is already very snug because of a planned maintenance shutdown at an extraction unit in the Netherlands and constraints on BD feedstock crude C4 output due to cracker turnarounds and light feed cracking.
Domestic European consumers are attempting to maximise their contract volumes from some suppliers to manage the shortfalls resulting from the unplanned issues at other suppliers.
However, a consumer said: “So far we are still able to find volumes, it's tough, but we find volumes. We are missing only a small part of our regular tonnes."
Additionally, export demand from the US is very strong. Already a net importer of crude C4 and BD, it has been heaviliy impacted by the loss of supply from Europe and Libya - an important crude C4 exporter.
The April US BD contract settlement has been split at plus 17cts and plus 19cts/lb, putting the contract at a minimum of $1.21/lb - equivalent to €1,867/tonne.
A source said that the US “was on its knees” for the C4 molecule.
There were reports that up to three 5,000-tonne cargoes had been tendered for sale in South Korea.
One early April loading cargo was booked into the US at a level around $3,000/tonne FOB, which would mean a landed cost of about $1.55/lb, according to sources.
Another cargo was sold into Europe for end-May arrival - partly to a major end-user. The final price was not disclosed, but the selling price was thought to be sub-$3,000/tonne FOB. Freight rates for South Korea to northwest Europe are around $300/tonne, according to some sources.
While it has long been recognised that global BD demand will outweigh supply, sources are increasingly concerned at the speed at which prices are rising, particularly since the market is not yet at its seasonal peak.
This is usually during the summer months, when C4 supply is at its lowest because of the traditional liquified petroleum gas (LPG) cracking season. Cracking LPG produces less crude C4.
With apparently ever-increasing prices, credit lines were becoming an issue, according to one seller. Others said that credit issues may eventually cap buying needs.
($1 = €0.70)
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