11 October 2013 13:04 [Source: ICIS news]
LONDON (ICIS)--European spot butadiene (BD) export prices have continued on the uptrend driven by limited European supply and firm Asian demand, reaching 19-week highs, market sources said on Friday.
Export prices have reached $1,250-1,300/tonne (€925-962/tonne) FOB (free on board) ARA (Amsterdam-Rotterdam-Antwerp), prices not seen since the end of May 2013.
European BD supply is being restricted by planned maintenance turnarounds on extraction units as well as at the cracker level which is limiting the availability of BD’s crude C4 (CC4) feedstock. Cracker operators are also favouring lighter feedstocks such as propane, which also produces less CC4 compared with naphtha.
Sources also note increased contract offtake from domestic European consumers because spot prices are higher than contract prices and this is also limiting what is available for the spot market.
Asian demand and therefore pricing has picked up significantly over the last few weeks largely on the back of tighter than expected supply because of the start-up delays of new BD units in China, Indonesia and Taiwan. Those with stocks in hand have been able to dictate ever higher offer levels.
However, while there are still concerns about the sustainability of the price increases, with most sources agreeing that structural demand levels are not about to improve any time soon – sources quite readily accept that demand growth from the key end-user tyre market is looking limited even for 2014 – it seems to be a case of making hay while the sun shines, and European producers and traders are taking advantage of the situation.
For some sources, the outlook is no longer so pessimistic. New capacity start-ups could be delayed further and some believe that derivative inventories have finally been worked though so that the demand being seen, even if not in full recovery, is at least the real thing.
Europe is structurally long and relies heavily on the Asian market and, to a lesser extent, the US as an outlet.
The general view is that the spot market will remain buoyant through October, but a softer situation will prevail moving into November and towards the year end, not least as European BD unit and cracker maintenances come to an end.
“Weakness is expected, but its not happening yet,” said a European BD producer.
($1 = €0.74)
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