Bleak Downstream Demand Holds Back European Butadiene Market Growth

Butadiene prices have demonstrated a downward stagnancy across the European market in early December 2023. The declining downstream demand and adequate availability of Butadiene within the regional market have prompted manufacturers to decrease their quotation slightly. Moreover, market players projected a further decline in Butadiene prices as manufacturers destock the inventories existing in the region amid dull demand. However on the other hand, feedstock prices have started to rise, but they have had a limited bearing on the prices of Butadiene.

As per ChemAnalyst's latest database, German Butadiene prices have shown stagnancy, with a slight decrease of USD 5/MT in the first week of December 2023. The pace of inquiries originating from the downstream Synthetic rubber such as Nitrile Butadiene Rubber, Synthetic Butadiene Rubber and Polybutadiene Rubber and Polymer Acrylonitrile Butadiene Styrene industry has persisted to decrease in the domestic market. The offtake of Synthetic rubber and Polymer from the end-user automotive and construction sector has remained bleak amid weak consumer sentiments supporting the prices to follow the current pricing trend of Butadiene in the domestic market. According to KBA federal transport authority, a total of 245,701 new cars hit the road in Germany during November 2023, a drop of 5.7% from a year earlier. The decline in car sales was attributed to the plummeting demand for electric vehicles as government incentives ran out. Consequently, it impacted the demand for Butadiene.

However, Eurozone inflation continued to drop closer to the European Central Bank's (ECB) target. According to flash data released by the EU's statistics agency Eurostat, annual inflation is projected to fall to 2.4% in November, down from 2.9% in October, which may perhaps enhance consumers' purchasing power in the forthcoming weeks. In addition, a major producer of Butadiene in Europe, Shell, has reported adjusted earnings of $6.22bn (£5.1bn) in the third quarter of 2023, a 34.1% decrease from $9.45bn the previous year amid tepid global demand.

Furthermore, due to tepid downstream demand, manufacturing firms have operated at reduced rates, i.e., 60-70%, to maintain the supply-demand equilibrium. In addition, the German manufacturing Purchasing Manager Index remained in the downturn, mirroring a contraction in new orders. On the other side, some manufacturers plan to shut their plants in mid-December due to a slowed downstream demand. Despite this, the level of inventories was high to meet the existing downstream demand.

However, feedstock Naphtha has risen, uplifted by strong crude oil prices as OPEC+ considered additional output cuts of up to 1 million barrels per day. As per the sources, Brent crude oil was trading at $82.99, up 1.60% for a $ 1.31 per barrel gain. Conversely, market participants reported that the rise in feedstock Naphtha prices has a minimal impact on the prices of Butadiene. As a ripple effect, prices of Butadiene FD Hamburg were settled at USD 714/MT during the week ending 1st December.

ChemAnalyst anticipates that Butadiene prices might fall in the coming weeks as demand from the downstream industry is not likely to improve until the second half of 2024. The feedstock Naphtha prices might ease amid weak demand, which might decrease the manufacturing cost of Butadiene in the European market. Meanwhile, cheap completive offers from the Asian market may further weigh down the Butadiene prices.