Production issues and planned maintenance at a number of sites tightens supply, lending support to imports
Tight European butadiene (BD) supply could be opening the door to Asian volumes, with apparently one 5,000-7,500 tonne parcel already being discussed for European arrival – a rarity given Europe is structurally long and usually an export region, but not unheard of, sources said on 21 March.
In a market hit by two force majeures, technical issues at a third site, and some operational issues at a fourth site, amid planned maintenance at yet another, the prospect of securing some alternative tonnes from outside Europe is looking increasingly attractive, at least in theory.
However, in practice, sources say the long lead time and the uncertainties regarding contract pricing going forward make it very difficult for a European consumer to commit and risky for a trader to not do a deal on a back to back basis.
“I was looking at Asia [import] and trying to convince main buyers, but with arrival in May and still the contract prices for April and May to be determined, it’s difficult to piece together,” a trader said.
“Fixing a landed price now would never make sense,” it added.
A second trader said, “[European] buyers are cautious with the long lead time and you can’t sell an Asia cargo with the current levels.”
According to market sources, the vessel Clipper Viking will load in Asia and in Hazira, India, with BD destined for Europe, although other sources said the destination is not yet fixed and the option to the US is still open. Further details have not been disclosed by the parties involved.
“I don’t think it will come to Europe, the US will pay more,” a producer said.
In terms of selling prices, some sources suggested that an $1,150/tonne FOB Asia price could mean $1,500/tonne on a landed Europe basis – on the face of it, not enough of a gap to make the deal attractive. US spot levels are higher and closer to $1,600/tonne delivered.
A weak Asian BD market has seen several cargoes head west over the past few weeks to cover US demand, which had been affected by unexpected supply issues.
However, spot pricing is thought to have peaked in February as supply problems have been resolved and because of the steady arrival of import cargoes.
Asia is the driver for the global BD market; if demand fails to pick up, sources said the US and Europe can expect more volumes of BD and its derivatives, specifically styrene butadiene rubber (SBR), to head in their direction.
April contract agreed at rollover price
The European butadiene (BD) contract price for April has been agreed at €1,025/tonne, a rollover from March, a participating consumer confirmed on 31 March.
The contract, which was settled on an FD (free delivered) northwest Europe (NWE) basis, was confirmed on 28 March by four producers and another consumer. The settlement must be confirmed by a minimum of two producers and two consumers before it is considered an official monthly contract price.