Europe BD supply constraints fail to stem spot price declines

17 May 2017 15:23 Source:ICIS News

Focus article by Nel Weddle

LONDON (ICIS)--Current constraints on butadiene (BD) supply in Europe have failed – at least so far – to stave off ongoing bearish price pressures emanating from Asia and the US, market sources said on Wednesday.

Despite two unplanned outages in the market with no indications yet of any end dates, and with two planned maintenances having only recently been completed (a third scheduled turnaround is under way and not due for completion until mid-June), a spot deal was concluded this week at €1,320/tonne for 2,000 tonnes to be delivered in June, the lowest price seen since mid-December.

Until now, deals had been transacted in the high €1,400s/tonne to low €1,500s/tonne, depending on volume and mode of transport.

“Everyone is ready to sell quickly,” a source said. “They are worried – Asia and the US are not looking good.”

“I am getting a lot of offers from producers,” a second source said.

“The main question seems to be what are we going to do with all the BD length in June,” the second source added.

Since mid-February, weak global markets reduced exports from Europe – a traditional exporter of BD – to the minimum, which, given the spring cracker and BD unit turnaround slate from early March onwards, was not such a big deal.

However, now that the turnarounds are largely complete, sentiment is increasingly bearish as there does not seem to be any sign of a reversal of fortune in either Asia or the US.

Not only have exports reduced, but Europe has also seen volumes incoming from Asia and the US – and at levels much cheaper than witnessed in Europe.

Spot prices had no choice but to drop further, sources said, in order to close the arbitrage windows and to make imported material unattractive.

“Imports from Asia are still on offer at lower prices than this [€1,320/tonne],” a third source said.

The two unplanned outages in the market have helped to reduce some surpluses, but sources do not expect these outages to be long-lasting.

Evonik declared force majeure on BD supply from its Antwerp, Belgium plant last week following a fire. There is no news from the company in terms of restart expectations, but a company source said it would be able to supply 50% of its commitments in May partly through re-directing its volumes normally earmarked for export.

Total’s BD unit at Feyzin in France has been offline since 9 May due to strike action at the site. It is not clear when operations will be back to normal, but the unit is relatively small and any impacts are confined to the local area.

All the above will make for another difficult round of contract price negotiations when the time comes to find an outcome for June.

“The next step will be to align the June contract price to a level much more in line with the worldwide market,” the second source said.

A fourth source added: “I can’t contemplate anything but a three-digit decrease for June.”

June contract price discussions will get under way next week.

Follow Nel Weddle on Twitter

By Nel Weddle