BD players eye reverse arb options on weak Asia, tight Europe

22 March 2013 12:14  [Source: ICIS news]

BD is used in producing synthetic rubbers, which go into the manufacture of tyres for the automotive industry.LONDON (ICIS)--Ongoing weakness in the Asian butadiene (BD) market as European supply tightens is leading some traders to explore import possibilities, market sources said on Friday.

“I have had two proposals from traders [for Asian tonnes]," a major consumer said.

“Asian sellers are looking at exporting BD [to either Europe or US]”, a trader said.

A second trader said it had been eyeing the possibility of exporting Asian volume but that there was “nothing concrete yet.”

Europe is traditionally an exporter of BD to Asia and the US, but a combination of factors such as reduced cracker rates, light feedstock cracking and a series of unplanned and upcoming planned outages, have restricted supply.

Tightening availability has pushed European spot prices above the prevailing contract value for the first time since July-August 2012. Spot prices are currently heard in the mid €1,400s/tonne ( FD (free delivered) NWE (northwest Europe).

Asian prices have been plummeting since their peak at $2,050/tonne (€1,579/tonne) CFR (cost, freight) NE Asia mid-February, largely because of poor downstream demand. ICIS assessed Asian spot levels at $1,700/tonne on 15 March, but prices this week have reached the $1,500s/tonne.

Most sources were not entirely convinced that importing BD was a viable option.

“The pricing doesn’t work,” said a third trader, particularly given freights of around $350-400/tonne.

One potential price indication was heard at $1,900/tonne, which would fit in with current European spot prices, but sources generally agreed that volumes would have to be very competitively-priced to come to Europe, given the long lead time and usual logistical challenges.

“There could be interest [to buy] but by the time it would arrive, maybe not” said the first trader.

One market observer in Asia said that "traders are looking for vessel space for Asia to Europe for possible April shipment."

For many, the concern was not over cheaper BD monomer imports but rather the influx of cheaper BD derivatives, such as synthetic rubber. European BD consumers have said that their concerns over demand are escalating and their efforts to export are failing.

($1 = €0.77)

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By: Nel Weddle
+44 20 8652 3214

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