LONDON (ICIS)--European butadiene (BD) spot export prices have continued to rise this week, driven by ongoing spot demand in Asia amid some supply constraints, market sources said on Thursday.
Spot export prices have been on the ascent since early August when spot deals were in the high $700s/tonne FOB (free on board) ARA (Amsterdam, Rotterdam, Antwerp), having languished in the low $700s/tonne for the whole of July.
However, the speed of the ascent picked up this week with deals done so far at $950-975/tonne, $100-125/tonne higher than last week’s spot deals.
This jump in European spot price levels has highlighted the increasing competition among traders for spot volumes that are more limited than players had expected. Traders with structural supply from producers often seek additional spot tonnes in order to optimise freight costs.
Scheduled turnarounds are, or are soon to be, underway in both Europe, Asia and the US but, prior to this, a combination of unplanned issues and some careful tailoring of output to meet demand had already left supply flexibility in Europe at a low level.
“We think that all the talk surrounding the extent of the US volumes recently [up to 25,000 tonnes moving ex US to Asia when even two cargoes is a rarity] gave Asian buyers the idea that more volume would be available at the low prices,” a source said.
It added that “they were caught off guard”.
“It's difficult to find all volumes so easily in Europe, to build a vessel these days,” a second source said.
European players will inevitably be cautious as to how far prices will go, having seen the last Asian price rebound stall in early July, but they are well-used to the pricing volatility of the Asian market.
Opinions are fairly mixed on this but many sources canvassed so far this week believe the current situation to be on more-solid ground and more sustainable than a few weeks ago.
“I think it is more solid. I am bullish, I don’t fear its going to collapse, but of course no-one knows,” a third source said.
“There is still Asian buying interest, there is still some need,” the first source said.
Other players were less than impressed about the recent price moves.
“I am absolutely not convinced this is a solid rebound – it’s the same old story – TARs [planned turnarounds] have been announced and this is the opportunity to push up prices, but some derivatives are on turnaround too,” a fourth source said.
It added that the price movement is “heating up the mood in Europe as well”.
A fifth source said: “High prices should be based on higher demand, this is about lower supply.”
"We are very cautious, our margins were shrinking in July, our weakest area is Asia,” it added.
The firmer spot prices, in combination with higher naphtha feedstock values month on month – to date euro-denominated naphtha costs are around €28/tonne higher in August when compared with July – have led to an increase of €25/tonne being agreed for the September BD contract price on Thursday.
Focus by Nel Weddle
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