Butadiene Prices Show Upward Trend in Europe and Asia Amidst Rising Feedstock Costs

Entering in August 2023, prices of Butadiene have witnessed an upward trend across the European and Asian markets amidst high-cost pressure from upstream values. Although, demand from the downstream industries has shown no sign of recovery in the regional market amidst the slow economic recovery in Asia's largest economy, China, as well as firm inflationary pressure in the Eurozone along with the rise in interest rates by the central bank. Additionally, the Asian market has been battered by serve adverse weather conditions, including Typhoons, which hampered logistics and industrial activities. However, in the US market, Butadiene prices showed no major fluctuations during the first week of August as demand from the downstream industries remained moderate while the material availability lingered sufficient in the regional market.

Butadiene prices have increased in the Chinese market, supported by the high feedstock Naphtha prices. On the upstream front, Crude oil prices have been rising since June, primarily because of extended, voluntary cuts to Saudi Arabia's production and increasing global demand, which positively impacted the production cost of several downstream commodities, including Butadiene. Although market players reported demand for Butadiene from the downstream synthetic rubber (NBR, SBR) and polymer (ABS) sectors remained steady as consumption from the automotive and construction were moderate in the domestic market. The downstream procurements were mainly based on a need-on-demand basis. On the other side, several typhoons have disturbed the Chinese market since July. Typhoon Talim landed in Southern China's Guangdong province on July 17, and then Typhoon Doksuri knocked into southeast China's Fujian province on July 28. After that, shipping terminals services in Eastern China were disrupted again amidst Typhoon Khanun last week. Furthermore, Bora Lyondellbasell Petrochemical in Panjin, Liaoning, China, having a production capacity of 120,000 MT/ year, has shut down its Butadiene plant amidst maintenance turnarounds. As a result, prices of Butadiene CFR Qingdao were settled at USD 732/MT with a week-on-week increment of 2.8% during the week ending August 4, 2023.

After the bearish run over the past few weeks, Butadiene prices have unexpectedly increased in Europe's largest economy, Germany. The latest rise in the prices was majorly attributed to the increasing feedstock Naphtha prices which resulted in the high production cost of Butadiene in the domestic market. On the other side, the upstream crude oil prices were also observed on the higher end with the tighter supply due to Saudi Arabia's oil output restriction and news that OPEC production dropped by more than 1 million barrels per day in July. However, market players reported that inquiries from the downstream synthetic rubber and polymer industries remained inactive in the wake of the summer holidays and did not decrease Butadiene's price realizations in the domestic market. Furthermore, the Ifo Business Climate index dropped from 88.6 points in June to 87.3 in July 2023. Therefore, prices of Butadiene FD Hamburg were assessed at USD 521/MT with a week-on-week increment of 3.8% during the same time frame.

Although Butadiene prices have remained unchanged in the US market due to steady demand from the downstream synthetic rubber and polymer industry, the level of inventories remained sufficient as new orders declined in the domestic market. Furthermore, the US purchasing manufacturing index slightly increased from 46.0 in June to 46.4 in July, still below the bar performance. In addition, the TPC group in Houston, Texas, US, having a production capacity of 517,000 MT/year, resumed operation in early August following an unplanned outage. Consequently, prices of Butadiene CFR USGC were settled at USD 528/MT on August 4, 2023.

As per ChemAnalyst's estimation, Butadiene prices are likely to increase due to a rise in cost- pressure from the upstream values. Demand from the downstream synthetic rubber and polymer industries is anticipated to improve but at a slower pace in the forthcoming weeks.