13 July 2012 12:22 [Source: ICIS news]
LONDON (ICIS)--European butadiene (BD) spot export prices have broken the $2,000/tonne barrier on the back of supply-driven demand from Asia, although there are concerns this is nothing more than a short-term rebound, market sources said on Friday.
Asian prices have been rising rapidly since mid-June when a power outage shut Taiwanese producer Formosa Petrochemical Corp's (FPCC's) crackers and disrupted BD supply. Sellers hiked prices and the activity was mostly trader-led, but buying interest was also heightened by domestic supply concerns in China amid several planned cracker turnarounds in the July-August period.
European spot export prices have risen in line with Asia from a low of $1,400/tonne (€1,148/tonne) in early June, as BD producers and traders have scrambled to take advantage of the arbitrage opportunities.
This week, export cargoes were reportedly concluded at $2,000/tonne and $2,050/tonne FOB (free on board) ARA (Amsterdam Rotterdam Antwerp) and discussions are said to be taking place at $2,100/tonne.
However in contrast, domestic spot activity is very lacklustre and inland spot prices have been much slower to pick-up, remaining at or below the prevailing July monthly contract price of €1,500/tonne FD (free delivered) NWE (northwest Europe)
Export opportunities are key to the overall health of the structurally-long European BD market and even more so currently as domestic contractual demand is soft.
“Demand is still not good” a major BD consumer said. “We don’t not expect any changes in July and August.”
It added it had reduced its BD consumption in July, but had still ended up selling a 1,000 tonne lot because of its need to rebalance its system.
“It's only 10-11 July and already we know our stocks will be higher than we thought,” the major BD consumer said earlier in the week.
The weaker demand picture within Europe has been offset to some extent by cracker reductions, light feedstock cracking and a couple of unexpected production hiccups, but if Asian demand for European volumes stalls, then the market could rapidly deteriorate and spot export prices fall once more.
"I don’t see any fundamental change in Europe, if we are able to move volumes to Asia – good - but I don’t see that Europe has moved in any direction, neither better nor worse,” said a producer referring to its expectation that there would be little-to-no recovery for European derivative demand.
The producer added: “I feel that we haven’t seen the bottom yet.”
Several sources said they thought the market was near its peak as the Formosa cracker issues in Taiwan had been resolved and domestic Chinese prices looked to be stabilising. Squeezed derivative margins have reduced the already limited interest from derivative producers.
($1 = €0.82)
Follow Nel on Twitter for tweets on the BD market. The 1st ICIS Butadiene & Derivatives Conference will be held from 11-12 September 2012 at the Pestana Hotel in Berlin, Germany. Click here to register.
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