Europe BD production up slightly in 2011, bucks olefins trend

25 January 2012 17:21  [Source: ICIS news]

LONDON (ICIS)--European butadiene (BD) production was largely stable in 2011, rising less than 1% compared with 2010, bucking the trend of the other olefins ethylene and propylene which both declined 3-4%, according to data released by the Association of Petrochemical Producers in Europe (APPE) on Wednesday.

The figures showed a 0.4% year-on-year rise in BD volumes in 2011 to 2.09m tonnes.

BD managed to buck the 2011 olefins trend primarily because volumes in the first quarter were around 7% higher than in the same period the year before. Strong export demand from Asia and the US and domestic demand had pushed prices considerably higher and so there was plenty of incentive to run extraction units hard.

Output weakened in the second and third quarters because of planned maintenance shutdowns at crackers and extraction units and the shift to cheaper alternative feedstocks such as liquefied petroleum gases (LPG) which produce less C4s.

In spite of the supply restrictions, record high pricing began to take its toll on derivative producers who started to cut back consumption.

In the fourth quarter, poor demand amid fears over the global economy and eurozone debt, which impacted so heavily on ethylene and propylene operations, also weighed on the butadiene market.

Fourth-quarter BD production was down 11% from both the third quarter in 2011 and the fourth quarter of 2010, as cracker operators had no choice but to cut utilisation rates.

A couple of sources said that a truer indicator of the market’s performance in 2011 was that although production overall was relatively stable, the level of exports had risen compared with the previous two years. This showed that domestic European demand for BD could not be in a good position.

Total exports for 2011 were estimated by one source to be 164,000 tonnes, up from 100,000 tonnes in 2010. Export volumes increased through the year, with the peak of 57,000 tonnes - thought to be a record high - said to have been evacuated from the European market in the fourth quarter alone.

Export demand - primarily to Asia - is continuing to play a huge part in the European BD market. Covering ahead of the Lunar New Year and upcoming maintenance shutdowns has led to rapid spot price increases once again and inevitably a call by domestic producers to increase European contract prices to bring levels more into line.

February monthly contract price discussions are ongoing this week, with a settlement anticipated by the close of business on Friday 27 January. The January contract settled at €1,700/tonne ($2,208/tonne) FD (free delivered) NWE (northwest Europe).

($1 = €0.77)

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By: Nel Weddle
+44 20 8652 3214

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