Bearish pressure on Europe BD producers mounts as Asia volumes move in

18 April 2017 13:49 Source:ICIS News

Bearish pressure on Europe BD producers mountsLONDON (ICIS)--With the first butadiene (BD) volumes fixed to Europe from Asia at considerably below the prevailing contract price, and with scheduled maintenance soon to come to an end, Europe’s BD producers will be feeling the pressure if an improvement in export demand and pricing is not seen soon, market sources said on Monday.

3,000 tonnes of BD was fixed on Friday at €1,475/tonne CIF (cost, insurance, freight) ARA (Amsterdam-Rotterdam-Antwerp) for May delivery. The volume is thought to be part of a bigger parcel due to load on the vessel Navigator Pegasus in Taiwan later this week.

The current April contract reference price stands at €1,750/tonne FD (free delivered) NWE (northwest Europe).

European BD producers have so far been largely insured against the significant price drops seen in its key export market Asia since mid-February because of a raft of scheduled cracker and BD unit maintenance.

“People are on turnaround so are not under pressure to sell,” a source said, “but eventually they will have to follow [the global pricing trend].”

Initially, there was a widely held view that planned turnarounds in Asia in the April-May timeframe would lead to a rebound in prices and a pickup in demand, but so far all that has happened has been a slowing to a stabilisation of the downtrend and players are losing confidence over a reversal of trend.

Meanwhile, Europe’s scheduled maintenance slate has entered the final few weeks, with cracker and BD unit restarts expected over the next two-three weeks.

With no spot export market to speak of, domestic consumers have been benefiting from the improved availability and increased offers from traders as well as producers, particularly those consumers able to access the barge market.

 “Water is less [expensive] because water volume is the one left without export market [opportunities],” a second source said.

“Rail is congested, I imagine that some producers on turnarounds put some railcars in maintenance at the same time,” the second source added.

“It [European volume] cant go to Asia, it can’t go to US, so left with only European buyers,” a third source said.

It added: “It is no longer the case that people want material at any price.”

Domestic spot prices have been slowly retreating since the peak in early March with the first deal recorded below the contract price this year done on 3 April. Many anticipate lower prices to come.

“Every day, sellers are calling me and traders are offering more Asian volume,” a fourth source said, adding that suppliers who had earlier talked of tightness now appeared to be in a position to offer spot volume.

Another potentially dark cloud on the horizon for Europe’s BD players was talk of some cautiousness creeping in for buyers further down the BD value chain.

“Everyone is being very careful now,” the fourth source said.

Focus article by Nel Weddle

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By Nel Weddle