Europe BD spot prices firmer on supply constraints, better demand

Author: Nel Weddle

2020/01/17

LONDON (ICIS)--Supply constraints amid the traditional pick-up in demand have made for a more positive start to 2020 than butadiene (BD) sellers had been expecting.

Spot export prices have breached $700/tonne FOB (free on board) from the low $600s/tonne, and possibly lower, in the fourth quarter.

Domestic spot prices were assessed in the mid to high €600s/tonne delivered in December, but the most recent deal has been concluded just above €700/tonne, still below the prevailing January contract reference price.

Strikes in France continue to affect product flows, with the result that operating rates at some sites have been reduced. Four crackers have experienced unplanned outages, most recently at BP’s Gelsenkirchen, Germany site, and turnaround preparations are ongoing for spring maintenance outages.

While demand from domestic consumers is described as steady, contractually covered and in line with expectations in most cases, shorts emanating from the issues in France have resulted in some requests for additional volume.

Some news that a major BD consumer may ramp up its operations at a faster-than-expected pace is also seen as a positive development for Europe’s producers, but this has not been confirmed by the consumer in question.

However, most of the focus is on export opportunities and some sellers say there is quite a bit of upside potential.

There is interest from the US for European volumes following US producer TPC’s outage in December. One source said it had received many requests for volumes to export west.

Asia markets are slowing in the run-up to the Lunar New Year holiday on 25 January, but buying interest is said to be poised to resume afterwards in view of the heavy turnaround slate due to get under way in the region in earnest in March.

Added to that, the latest development in the US-China trade tensions will have sent a more positive message to Asian derivative producers, although there is still a long way to go.

Europe’s producers know that while Asian supply might be tight in the first quarter of 2020 due to planned maintenance outages, the timing of new capacity expected onstream this year will be crucial.

Asia’s BD production capacity is expected to grow by about 800,000 tonnes/year, 70% of which will be in China.

“We have started the year on a positive note, but the biggest threat is what will happen with the new capacities in Asia,” a source said.

(Front page picture: Strikes in France, which are affecting product flows.
Source: Robin Letellier/SIPA/Shutterstock)

Focus by Nel Weddle.

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