Europe BD contract talks underway amid uncertainty over Asia rebound

Nel Weddle

23-Mar-2017

Focus article by Nel Weddle

LONDON (ICIS)–European butadiene (BD) April contract price discussions have gotten under way this week but there remains some uncertainty over whether a rebound in demand and pricing will be seen in Asia, market sources said on Thursday.

In the key Asia market, spot prices fell 32% from mid-February to mid-March as derivative producers cited affordability issues amid softening natural rubber prices. Surplus Asian BD cargoes were fixed for export to the US as a result in an attempt to put an end to the downward price trend and in any case, many players thought the prices would soon bottom out as planned turnarounds in Asia in April-May would see demand and pricing pick-up once again.

Europe’s BD supply has been heavily constrained due to planned and unplanned turnarounds and strong domestic demand, meaning that actual spot export trade in any direction has been severely restricted this year and is likely to remain so at least through April.

This has afforded European producers’ some protection from the downward price trend being seen in Asia and the US but concerns will be growing should Asian export demand not show signs of picking up over the next couple of weeks given the up to six-week delivery time Europe to Asia.

So far, the signs were not looking too promising, particularly since April contract price nominations in the US have also started to emerge, showing a clear downward trend month on month.

“Sentiment is extremely weak [in Asia], people have cargo, so see no reason for a rebound,” a source said.

“Traders are checking to see if European volumes are available [for Asia], but we are not sure how serious they are,” a second source said.

There was even talk that some players were investigating opportunities for exporting Asian BD into Europe – a rare occurrence .

“People are looking at it, why not?” the first source said. “It could happen, but at the moment [Asian] sellers are still reluctant to let cargo go at cheap prices.”

All this uncertainty has proved a bit of a dilemma for contract players trying to position themselves for the April contract price discussions.

“There is a difference between desire and the real fact,” a third source said. “Pick up or no pick up, we can’t speed it [time] to find out the outcome.”

“The whole world around Europe has changed, plus Europe’s costs have come down,” the third source said.

Some players said that European BD producers may attempt to hold on to recent price gains as well as enjoy some margin expansion.

Although maintenance at at least two sites should be complete by mid-April, there is likely a backlog of demand to be fufilled following unexpected production issues earlier in the year and those that are on-going.  

“There should be some sensitivity to the fact that costs have changed direction, but we shouldn’t exclude that the market will be tight in April,” the third source said.

“Hopefully this will be reflected in the contract price discussions,” the second source said.


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