Europe BD spot market export opportunity may already be over

Focus article by Nel Weddle

LONDON (ICIS)–European butadiene (BD) spot market players are wondering whether the opportunity to export volumes to Asia is already over, barely a month since the arbitrage began to open in a more meaningful way and opinions are somewhat divided.

“The market is already calming down,” a trader said.

“It’s calmed down in Asia,” another trader said, “although the arb [arbitrage] is open if you are smart with freight.”

European spot players had been keeping a close eye on Asian market developments, waiting for the point when the arbitrage would open sufficiently to allow the up until now reluctant European producers to release more incremental BD.

That point started to be reached a couple of weeks ago and the BD spot market, which up until then had been a lacklustre affair, began to stir.

Last week saw the first export fixtures to Asia for 2014 as prices reached the mid-high $1,600s/tonne delivered to Asia.

Freight from Europe is usually indicated at around $350/tonne and prices around $1,300/tonne FOB (free on board) ARA.

A 2,600 tonnes BD cargo has been fixed for September arrival on the vessel Prins Johan Willem Friso.

Another two vessels – Victoria Kosan with 4,800 tonnes on board and the Norgas Conception with 3,500 tonnes and part of a combination cargo with chemical grade propylene (CGP) – are also understood to be fixed in the August loading time-frame for export to Asia, but are not confirmed.

Somes sources have been surprised about the fixtures, and many still talk about there being limited BD availability in Europe.

“We get requests from almost all traders,” a producer said, “but we are not selling spot.”

“All of them [traders] asked me for material availability for August and September,” a second producer said, adding, “but we have lower production – nobody seems to have any length.”

In addition to European volume, Brazilian, Iranian and Indian product is also expected to arrive in Asia in the September time frame.

These volumes together with some speculation that a derivative outage in the Asian region would last longer than it actually has, dampened demand and buyers retreated to the sidelines, prompting Asian players to offload stocks.

Asian prices have once again moved below $1,600/tonne which effectively shuts out European volumes even if there were tonnes to be had.

Not all sources thought that the uptrend was over, however.

In their view, European volume in general remains fairly limited due to light feed cracking and temperature constraints – they questioned whether the Victoria Kosan in particular would be heading to Asia after all – and given the sell-off was partly sparked by the now-resolved unplanned outage – they felt Asian prices would return to levels at or closer to $1,700/tonne delivered.

“Altogether [I am] feeling that its [BD supply] is pretty limited, there are still quite a few shorts needing to be covered,” a third trader said.

However, other players said that some traders would have not be keen on prices falling having only just secured volumes via sales tenders at high prices.

“I hear [trader] is offering its cargo at $1,700/tonne, but am doubtful that can work,” a source said.

“It’s a cat and mouse game,” the third trader said.

Meanwhile, the US market remains a “dead duck” in terms of spot demand, according to one contact.

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