Europe BD supply chain hit by auto shutdowns, some firms act to avoid inventory

Author: Eashani Chavda

2020/04/09

LONDON (ICIS)--While the European butadiene (BD) supply chain faces disaster through reduced demand from the automotive sector, some companies have taken action to prevent inventory backlog from building up further.

European producer Evonik began its BD planned maintenance at Antwerp, Belgium a few weeks early, a company source confirmed.

Though the exact dates of the turnaround are unknown, it is expected to end in late May - with the 100,000 tonnes/year plant shutdown for over two months.

A company source said it began "a bit earlier than planned originally because our Marl production is at the moment absolutely enough to fulfil" the requests of customers.

Evonik's Marl, Germany BD plant has a nameplate capacity of 295,000 tonnes/year.

While weak demand and slashed prices remain a concern for producers, the outlook is no better for consumers who are struggling to accept contracted volumes while downstream derivatives also face lower consumption.

"Everyone is sitting on material right now. They don't have any outlet for that", said a BD buyer.

Butachimie, a large BD consumer, has had to lower its operating rates for adiponitrile (ADN) at Chalampe, France, due to reduced demand requirements.

The facility, which has a total ADN nameplate capacity of 625,000 tonnes/year, is running below 50% with no clear end date for the reduced production rates.

"We are getting less than our minimum contractual volumes, we have to negotiate our way for reduction of contract," said another buyer.

"It's a really a difficult time."

Other derivatives face a similar challenge, such as methyl tertiary butyl ether (MTBE), which prices have fallen to their lowest since March 1999.

MTBE demand has been weak as blenders work to get through stored blended gasoline.

Several MTBE producers are believed to have reduced plant operation rates as authorities across Europe imposed lockdowns to combat the spread of the coronavirus.

MTBE demand is likely to continue weakening as some countries delay the need to provide summer specification petrol at the pump to late into Q2.

"There's not much production at the moment on the full c4 chain but the demand is extremely low because people are not driving and a lot goes into MTBE, which goes into gasoline", said a BD producer.

Lengthy supply and bearish BD demand are expected to continue throughout April, with many looking ahead to May for hopes of improved market sentiment.

Focus article by Eashani Chavda

Additional reporting by Nazif Nazmul

Front page picture: BMW plant in Munich, idle since mid-March
Source: Lukas Barth-Tuttas/EPA-EFE/Shutterstock