Butadiene prices have gained an upward momentum across the US and European markets during the fourth week of September 2023 on account of high upstream prices. However, the persistent, firm inflationary pressure and high-interest rates have worsened the purchasing power of the end-user sector. Meanwhile, demand for Butadiene from the downstream Synthetic rubber as well as from the Polymer industry has shown no sign of improvement in the regional market.

According to ChemAnalyst's latest database, prices of Butadiene have increased by USD 45/MT in the German market. The feedstock Naphtha prices have continued to rise over the past couple of weeks, resulting in the high production cost of Butadiene in the domestic market. Furthermore, crude oil prices hit a ten-month high following the news regarding OPEC's projection of tighter supply for the year's end. Strong energy values have underpinned the continuing uptrend in the upstream market. However, market players reported that demand for Butadiene from the downstream Synthetic rubber as well as from Polymer industries has remained tepid. The spot transactions were also average, but it didn't weigh down the price realizations of Butadiene. Despite lingering weakness in demand, deteriorating material availability has been the main culprit behind the price gains in Butadiene. Major suppliers exhausted their excess stocks in the past couple of months while manufacturing firms were operating at reduced rates as demand has not fully recovered, which led to limited Butadiene supplies, supporting the prices to follow an uptrend. Meanwhile, imports reaching the German shores have been turning costly as the market sentiments in the Asian region were termed bullish, and the same can be seen in the prices of imported Butadiene. As a ripple effect, prices of Butadiene FD Hamburg were settled at USD 696/MT during the week ending 22 September 2023.

On the other side, Butadiene prices have drastically risen in the US market due to high-cost pressure from feedstock Butane prices. On the input energy front, the Natural prices have been observed on the higher end in the domestic market ahead of high demand. The Henry Hub spot prices increased 1 cent from $ 2.76 per million British thermal units (MMBtu), which proportionally impacted the production cost of Butadiene. However, demand from the downstream Synthetic rubber (NBR, SBR) and polymer (ABS) has remained moderate as offtake from the end-user automotive sector has mainly been based on a need-on-demand basis. Meanwhile, the construction industry's consumption has slowed as the housing market is rolling over from the weight of the Fed's rate hikes and high mortgage rates. Housing starts plunged 11.3% in August to a 1.28m rate, down 14.8% from a year ago. Furthermore, US manufacturing was firmly in recession, evidenced by the US Manufacturing Purchasing Manager's Index (PMI) reading of 47.1 in August 2023, which is up 1.2 points from July yet still below 50, reflecting contraction in industrial and manufacturing activity. Overall, the continuous support from feedstock Butane was keeping the prices of Butadiene at elevated levels. Thus, prices of Butadiene CFR USGC were settled at USD 598/MT with a week-on-week increment of USD 55/MT during the same time frame.

As per ChemAnalyst's anticipation, in the forthcoming weeks, Butadiene prices will likely increase in the US and European markets due to high upstream values. Demand from the downstream Synthetic rubber and Polymer industry is expected to improve, albeit at a slower pace.