Hamburg (Germany): Butadiene prices have been on a firm footing during the third week of March 2024, driven by high upstream costs and logistical snarls that inhibited the import flow of Butadiene. However, demand for Butadiene from the downstream derivative industry has shown steadiness this week. Most market transactions were mainly based on a need-on-demand basis. Market players brace for another hike in Butadiene prices in the coming weeks.

Market participants report that Butadiene prices have continued to rise in the German market. The cost side was one of the main drivers of the uptrend as feedstock Naphtha prices strengthened during this time frame. Furthermore, global crude oil prices surged by approximately 1% to reach a four-month peak due to diminished crude exports from Iraq and Saudi Arabia, alongside indications of heightened demand and economic expansion in China and the US. Consequently, the escalation in crude oil prices has heightened the overall production expenses of Butadiene in the local market.

In addition, operating rates have remained under pressure since Q4 of 2023, leading to limited availability of Butadiene in the domestic market. Furthermore, a lack of shipments from Asia amid longer lead times and soft buying interest led to a squeeze in import availability within the market. Although ocean freight charges skyrocketed in January, they have been decreasing amid lukewarm demand, which took the steam off shipping activities.

Market players also report that demand failed to stage a meaningful recovery following the holidays. Additionally, carriers have been able to manage their shipments via additional capacities, optimizing their operations through the longer route around Africa. Additionally, according to data from Freightos, the worldwide container freight index fell by 7% compared to the previous week, reaching $3,070/FEU as of 11 March 2024, marking a three-week downward trend. This brought the cumulative drop to 10% since February.

While the Drewry composite index fell more by 14% in the last six weeks to stand at $3,287 per 40ft container as of March 11. Although the composite index is still 82% higher compared with the previous year. Overall, inadequate supplies have pushed up Butadiene prices within the domestic market. On the other hand, demand for Butadiene from the downstream synthetic rubber market, notably SBR, PBR, and NBR, has been moderate in the domestic market, but it is expected that demand from the downstream industry will increase in Q2 of 2024 amid seasonal demand, which might raise Butadiene prices in the domestic market.

As a ripple effect, prices of Butadiene FD Hamburg were settled at USD 1042/MT with a week-on-week increment of USD 24/MT during the week ending March 15. Looking ahead, ChemAnalyst anticipates that Butadiene prices might follow a similar trend in the coming weeks due to further expectations of a rise in upstream and energy prices. Meanwhile, demand is expected to moderate amid steady consumption from the automotive and construction sectors.