OUTLOOK ’15: No optimism, just caution for Europe BD players

by Nel Weddle

LONDON (ICIS)–European butadiene (BD) market players have dropped the word optimistic from “cautiously optimistic” for 2015  – the most frequently repeated phrase in petrochemicals since the fourth quarter of 2008.

“Where careful optimism was the watchword in 2014, it’s now just careful,” a producer said.

2014 was not the year it was expected to be. Some sources had anticipated a slow but gradual recovery in growth through the year, others had just anticipated a better second than first half.

As it turned out, a very poor performance in downstream synthetic rubber, relating in part to oversupply in natural rubber, and compounded by more bearish growth forecasts, kept a lid on key Asian demand and pricing, which in turn impacted on the US.

However, despite everything, Europe managed to avoid the worse of the price pressure.

In the first half of 2014, as planned and unplanned cracker and BD extraction unit outages constrained supply and then in the second half as the absence of tonnes from Shell’s Moerdijk unit in the Netherlands, down following a steam leak in October, combined with healthy demand from European consumers happy to take advantage of the low spot prices.

New capacity was added in 2014 in Europe and more is expected by mid-year 2015. How this extra supply is accommodated remains to be seen as many European players are not holding out for any dramatic changes or improvements in demand from either Asia or the US, although the latter is expected by some to be in the driving seat in 2015.

“We expect the usual pickup in demand and restocking in January, but the big question is the performance of China,” a second producer said.

It added that they saw Asia ‘s 2015 more or less in line with 2014, but that the “US will pick up again and will be a pretty good outlet for Europe.”

“The US should lead market, not much hope for Asia [butadiene], its staring down the barrel of a gun,” a consumer said.

“We need to expect lower growth in Asia next year, plus they have new capacity coming onstream,” a second consumer said.

“I don’t see anything improving regarding supply and demand, the outlook for the next year is cautious,” it added.

“2015 will be volatile with lots of risk. With Europe long, Asia long and the US not pulling, it’s a challenging environment,” a trader said. “We can’t ignore the fact that China is not pulling and is getting more self-sufficent,” the trader added.

“[The] Moerdijk [outage] will help stabilise [Europe supply and demand] for a few months, and there are some fundamental drivers that are green,” the first producer said, pointing largely to improved car sales data in Europe and in the US.

It added though that the synthetic rubber sector needed to consolidate as supply was outpacing demand.

“2015-2016 is not a good picture [for BD] because of supply and demand in rubber, it will only find some balance in 2017,” a second trader said.

On Tuesday this week the January BD monthly contract price was agreed at €675/tonne, a €100/tonne decrease making it the lowest settlement since the third quarter of 2009.  

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