European Butadiene Price Grapple with High Feedstock Cost Heading into April 2024

Germany, (Hamburg): During the first week of April 2024, Butadiene prices witnessed hefty increases across the European market, supported by soaring energy and feedstock prices and scarce import offers. However, purchasing activity has continued to slow down as unfavourable economic conditions in the regional market dampened end-user demand. Market participants expect firmer expectations for the coming weeks, pointing to bleak demand on one side and cost-push on the other.

Prices of Butadiene have demonstrated an increment of USD 12/MT in the German market. The feedstock naphtha prices have increased in the previous week, resulting in higher production costs of Butadiene in the domestic market. Additionally, global crude oil prices were extending gains, with Brent crude surpassing the USD 91/barrel mark, fuelled by escalating geopolitical tension in the Middle East, which could disrupt supply amid output cuts by OPEC and its allies. The strong crude oil prices have further positively impacted the overall production cost of Butadiene, leading to bullish market sentiments among manufacturers.

Regarding domestic production, manufacturing firms are still operating at reduced rates amid tepid downstream demand. There were constraints in material availability to meet the overall downstream demand. Additionally, Germany's Manufacturing Purchasing Manager Index again remained in the contraction zone (i.e., below 50), reflecting a strong deterioration in manufacturing conditions amid faster falls in both employment and stock of purchases. On the other hand, market player reports several Butadiene plants have remained shut down amid maintenance turnaround, further reducing the supply of Butadiene in the domestic market. Consequently, prices of Butadiene have operated at a firm level within the domestic market. Meanwhile, imports from the exporting market have been under pressure amid the Red Sea crisis as well as firmer Asian markets, which further supported prices to follow an uptrend across the German market.

However, on the demand front, inquiries from downstream synthetic rubber, mainly NBR, PBR, and SBR, as well as from the polymer ABS industry, have slowed down ahead of the Easter holiday. The sluggish performance of the construction sector has weakened market sentiments of synthetic rubber and polymer, consequently impacting the demand for Butadiene. According to market sources, the German construction Purchasing Manager Index dropped from 39.1 in February to 38.3 in March 2024, indicating a further sharp decrease in construction activity. Meanwhile, new orders dropped at a slower pace, but demand continued to be constrained by a combination of tight financial conditions, high prices, and market uncertainty. Nonetheless, currently, it has a limited bearing over the prices of Butadiene across the domestic market. As a ripple effect, prices of Butadiene FD Hamburg were settled at USD 1066/MT during the week ending April 5th.

According to ChemAnalyst, prices of Butadiene are anticipated to increase further in the European market. Soaring feedstock naphtha prices will support prices to follow an uptrend in the regional market. The supply of Butadiene is expected to remain tight in the first half of April amid low operating rates. Despite this, demand from the downstream industry is likely to remain dull in the regional market amid economic uncertainties.