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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