Europe BDO supply tightens as demand from automotive rises

Author: Nick Cleeve


LONDON (ICIS)--European supply of butanediol (BDO) has tightened, though sources' views remain mixed on the extent of supply limitations in the market.

Increased demand, a production issue causing reduced rates for major producer INEOS during September and limited availability from Asia have resulted in lower availability of BDO.

Sources also referred to increases in spot pricing due to this change in fundamentals.

European supply of BDO has rebalanced, though some sellers see restrictions on availability.

One producer said that it had been approached by multiple customers looking for spot volumes due to tight market conditions, while another said that it would be difficult for a consumer to secure larger volumes of BDO in the current situation.

Buyers agreed that availability of material has reduced compared to recent weeks but said that supply continues to be ample.

One consumer said that it had been able to secure BDO above its forecast volumes for September and October without significant difficulty.

Demand is generally within or slightly above expectations for September, though some sellers saw large increases in demand between August and September.

Sellers, particularly, referred to rising demand from the polybutylene terephthalate (PBT) sector - a significant consumer of BDO.

Demand for PBT has risen in recent weeks, with one producer seeing a 40% increase in demand for September compared with August.

PBT is largely used in the automotive sector, which was heavily impacted by the coronavirus pandemic.

Weak consumption of derivatives with significant use in the automotive sector was the key driver of low demand for BDO during the second quarter and early third quarter.

Rising demand from the automotive sector and restocking during September have resulted in greater need for BDO from these consumers.

Negotiations for fourth-quarter contract pricing are at a very early stage, with talks likely to get under way in early October.

Supply and demand will be key talking points, as current conditions are a significant change from the long market conditions and weak demand that drove the settlement of third-quarter contracts at a €50/tonne decrease.

The influence of these fundamentals will depend on the persistence and extent of supply constraints and if the current rise in demand is seen as the beginning of a recovery or a more temporary increase in activity.

Pressure will also come from the seven previous consecutive decreases in quarterly contract pricing, which will encourage producers to seek an increase in their margins.

BDO is a chemical intermediate used in the production of polymers, solvents and fine chemicals.

Front page picture: A car factory in Germany; archive image
Source: Jens Meyer/AP/Shutterstock

Focus article by Nick Cleeve