Europe BD spot prices reach three-month high on strong demand, limited supply

LONDON (ICIS)–European butadiene (BD) spot prices have reached levels not seen since October 2017 on the back of a steady uplift in both domestic and export demand, sources said on Thursday.

Activity on the spot market so far this week placed prices in the export sector at four-digits figures, $1,000/tonne FOB (free on board) NWE (northwest Europe) or above.

Domestic activity, meanwhile, is focused on the high €700s/tonne DEL (delivered) NWE, with a deal concluded this week €25/tonne over the prevailing January contract reference price.

European supply was impacted by unexpected issues at a handful of crackers as well as late-planned maintenance at two BD units in December that, along with an uptick in export demand, essentially helped to offset any year-end domestic demand slowdowns.

There have been further hiccups on supply in January, notably at Dow’s Bohlen, Germany, site.

The growing preference for lighter feedstock cracking will also impact on C4s production.

Cracker operators have been turning towards propane because of its margin advantage over naphtha.

“There is more propane coming, so less BD, so we are reducing spot [activities] completely, and sticking to contracts,” a selling source said.

Meanwhile, BD domestic demand is at a high level, sellers said, with customers maximising on offtakes.

With limited flexibility on spot tonnes, competition for these volumes is fierce, particularly among traders.

“There is a lot of interest from traders, there are no January volumes left,” a source said.

Despite some uncertainty over market developments in the key export Asia market following the Chinese Lunar New Year, exporters are bullish.

“I don’t see any reasons for the market to go south,” a second source said.

“When you put the facts in, it’s hard to see a downturn,” a third source said.

Sources pointed to the upcoming cracker and BD unit turnaround season in all three regions, but particularly in Asia, which will start to get underway moving in and through the second quarter, as a main support for the global market.

Synthetic rubber affordability is higher, supported by increased natural rubber prices, and then not least is the upwards trend currently being seen in the energy complex.

Logistically, there are challenges as well which will be impacting on delivered product prices.

Freight rates are increasing due to limited vessel availability either due to geography and/or the strength of liquefied petroleum gas (LPG) trade dominating vessel space.

Perhaps the key to some European sources’ optimism over future developments is that this latest uptrend has been more considered, more gradual, with no volatility and this has meant that the price increases have been sustained.

“It’s better not to see spikes [in spot prices], [we have] seen smaller steps in the right direction,” the first source said, adding: “This is better for customers.”

A fourth source concluded: “Compared with this time last year, it [price increase] has been controlled.”

Discussions to establish February’s contract reference price will begin next week.

Most sources canvassed so far, all agree on the likely direction of the new settlement, the only question being the magnitude of any move.

BD is a key feedstock for styrene butadiene rubber (SBR), which is used in tyre manufacturing, among other uses.

Picture source: WestEnd61/REX/Shutterstock

Focus article by Nel Weddle

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