Butadiene Prices Recover in Europe: Temporary Bullish Trend or Seasonal Spike?

Hamburg (Germany): After experiencing bearish sentiments in the prior weeks, Butadiene prices have unexpectedly rebounded across the European market for the second consecutive week of December 2023. This recent increase has been attributed primarily to higher raw material prices. However, market players report that demand for Butadiene from downstream industries remains sluggish, with weak buying appetite among consumers. This has been insufficient to drive prices upward at the lower end of the regional market.

According to ChemAnalyst's latest data, Butadiene prices have increased by USD 44/MT in the German market. This increase is primarily due to higher feedstock Naphtha prices over the past two weeks, which have driven up the cost of Butadiene production domestically. This has led to a bullish sentiment among Butadiene manufacturers. However, domestic production has been reduced due to the lack of significant improvement in downstream demand.

Imports from the Asian market have become more expensive due to rising freight charges, which have further exerted upward pressure on Butadiene prices. Market sources indicate that the Shanghai Containerised Freight Index (SCFI) shows Asia-North Europe freight rates increasing by 9% to USD 925/TEU, while Asia-Mediterranean rates rose by 10% to USD 1,387 on December 8th. This marks the second consecutive week of growth for these rates. Furthermore, market participants anticipate that gains in Asia-Europe freight rates are likely to continue throughout December as shippers rush to deliver goods before Christmas.

Despite these factors, demand from downstream industries such as elastomers and polymers production remain subdued in the backdrop of off-season lull in the European markets. This is due to lacklustre consumption from the automotive and construction sectors in the domestic market. Market sources report that the Germany Construction Purchasing Manager Index (PMI) dropped from 38.3 in October to 36.2 in November 2023. This indicates that the construction sector remains in recession, with activity declining sharply across all segments, particularly housing projects. Furthermore, market participants express concerns about high costs, interest rates, and political uncertainty, leading to historically low expectations for future activity. As a result, Butadiene FD Hamburg prices settled at USD 758/MT on December 8th, 2023.

ChemAnalyst anticipates a potential decrease in Butadiene prices in the near future as the year draws to a close. Buyer anticipation of lower prices and weak year-end demand due to the off-season are likely to limit any significant upward movement. Additionally, stabilized feedstock Naphtha prices are expected to result in lower production costs and weaker overall sentiment in the market.