Price and market trends: Steady but soft Europe butadiene may prevail for rest of 2014

17 July 2014 18:14 Source:ICIS Chemical Business

Market is well balanced with traders finding it difficult to have enough volume to build an export cargo

Current European butadiene (BD) supply and demand fundamentals are widely expected to prevail through the remainder of 2014, market sources said on 8 July.

BD supply and demand have so far been fairly well balanced, aside from a short period of tightness at the end of the first quarter because of unexpected production issues.


 Low natural rubber prices have kept BD in check

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Excess supply was managed through exports to the US and when this was displaced by cheaper volumes available from Asia, a combination of light feedstock cracking and a close tailoring of rates to suit soft-but-stable demand, supported the market.

Even with the current issues being experienced at BD units in the UK and the Netherlands – both have suffered restart delays following planned maintenance and remain down, according to sources – there has been limited activity outside of contractual obligations.

While there has been talk of some additional spot buying, appetite in the domestic arena because of the missing tonnes, there has been little evidence of deals concluded even on a P&C basis.

“It [the impact] may be limited, but [at least] it’s something extra,” a producer said.

“There should be sufficient BD [to cover any shortfall] but it’s not easy to get,” a second producer said, reflecting on the somewhat paradoxical situation that because production has been closely aligned with demand, this has meant that timing and logistics for this “fresh” demand is not necessarily readily accommodated.

However, not all consumers appeared to be checking the spot market to cover delayed volume.

One consumer said it was checking availablity and offers, not because it needed the volume but because it thought that prices could be quite attractive.

“Its entirely opportunistic,” it said.

Another impact of the finely-balanced market has been that traders have found it difficult to have enough volume to build an export cargo and then additionally, prices in the US – still deemed to be the only viable outlet for European tonnes - are not providing enough of an incentive for European producers to ramp up rates.

One vessel recently left Europe bound for the US somewhat short of a full load.

“We found it extremely difficult to fill the vessel,” the trader said.

“I don’t think there is enough material around to build export parcel in July,” another trader said.

However, one of the consequences of BD rates being constrained and together with a couple of extended shutdowns in place, is that availability of crude C4 (CC4), the feedstock for BD, is increasingly lengthy.

“There is plentiful CC4,” the first producer said.

“There is more and more availability of CC4 in the market, [it shows] that people are not really willing to extract BD, “ a third producer said.

The US is usually the key destination for Europe’s excess CC4 but reduced consumption in favour of cheaper Asian BD, and recent difficulties removing by-product raffinate 1, has meant that their demand for CC4 has reduced considerably over the past few weeks.

Market sources talk of the vessel Navigator Taurus, loaded with CC4 and unable to discharge in the US since mid-June. Meanwhile, a second cargo - Navigator Pegasus - was reported to have been re-routed to Asia.

“In the past, traders were able to combine BD and CC4 [to make up an export cargo] but the US doesn’t want CC4 either,” the third producer said.

The second trader agreed: “We can’t combine BD and CC4 effectively.”

A small positive sign was that BD prices in Asia had been on the uptrend since the end of May, only recently flattening out.

However, with the increases supply-driven, European sources have failed to find much enthusiasm, uncertain over their sustainability having seen frequent peaks and troughs in the past. In any case, prices have not reached a level which could be attractive for Europe.

Another positive, according to a source, was that synthetic rubber stocks in Asia had been decreasing and that this could potentially be the basis for some sustained improvement in demand all round.

“It’s the only thing I can see that can occur in the next months [to change the outlook], the source said.

“The biggest concern remains natural rubber, with still very low prices, huge stocks, [I] don’t see what they can do with it,” the consumer said.

Natural rubber prices have a tempering effect on synthetic rubber in Asia as it is often used as a substitute in local tyre production.

“Overall, there is not a great deal [of change] to expect for the remainder of the year,” the consumer said, adding that it was looking forward to 2015.

By Nel Weddle