Europe BD shrugs off Asia weakness

15 March 2013 13:40  [Source: ICIS news]

LONDON (ICIS)--The European butadiene (BD) market will not succumb to the bearish pressures currently being seen in Asia, due to ongoing and upcoming supply constraints, market sources said on Friday.

“We have not been exporting, due to tightness in supply,” a producer said, “and slipping prices in Asia, closes the appetite.”

Supply in the European market - although structurally long, with Europe a key exporter to the Asian and US markets - has been restricted by a combination of factors. Reduced cracker operating rates, unplanned and planned cracker and extraction outages and the tendency of some cracker operators to crack lighter feedstocks have led to reduced availability of BD.

Light feedstocks such as liquefied petroleum gas (LPG) produce less of the crude C4 BD feedstock.

Domestic spot activity was boosted at the start of the year because of unplanned production issues and domestic spot prices firmed from around €1,200/tonne ($1,558/tonne) FD (free delivered) NWE (northwest Europe) into the low €1,400s/tonne FD NWE.

However, dollar-denominated export prices never quite matched the equivalent being seen on the domestic market, despite a run-up on the back of speculation that Asian demand would return in earnest following the Lunar New Year.

European suppliers said that they were seeing fewer export enquiries from the trade compared with just a few weeks ago. They added that the lack of export was not a problem in most cases, as domestic off-take was matching production levels and there was still scattered demand to cover some unexpected shortfalls.

There are still some opportunities for export to the US, a couple of sources said, at prices comparable with current domestic prices. No new deals had been seen at the time of writing however, and some sources said that demand in the US was also bearish because of the situation in Asia.

A few sources said that the price slippage in Asia was down to some liquidation of speculative cargoes, and may not be representative of the overall market. Most players said that stocks were high in the region and this, together with falling natural rubber prices and a poorly-performing downstream automotive sector, had taken its toll on the key derivative styrene butadiene rubber (SBR) market.

“I think the main problem is that inventories are high, it will take 1-2 months to clear,”a trader said.

But, a couple of European butadiene consumers cautioned that falling Asian SBR prices would eventually impact on their own export ability potentially reducing BD consumption in Europe.

“Concerns over demand are escalating,” one major consumer said, “derivative export into Asia is significantly slowing down.”

The consumer added that this was because of the high costs in Europe, versus the low costs in Asia which was now being exacerabated by soft demand.

($1 = €0.77)

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By: Nel Weddle
+44 20 8652 3214

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