European Butadiene Prices Struggle between bullish feedstock costs, weak demand fundamentals

Hamburg, (Germany): Butadiene prices ended June on a soft note across the European market as buyers’ appetite remained weak, with broader macroeconomic pressures continuing to limit demand from derivative sectors. Consumers were also observed to be buying hand-to-mouth due to weakness in downstream industries. On the supply side, Butadiene availability increased as production units ramped up following offline periods in May, further weighing down regional prices. However, feedstock prices have persistently increased, although they currently have minimal impact on Butadiene prices.

According to ChemAnalyst's latest database, Butadiene prices witnessed a decline of USD 80/MT in the German market. Market sentiment turned less bullish domestically as Butadiene supply improved with the ramp-up of several steam crackers after outages in May. Both Lyondellbasell’s cracker in Berre and Total Energies’ Gonfreville crackers resumed operations, collectively capable of outputting 140,000 MT/year of Butadiene. On the other hand, port workers in Germany initiated a ‘warning’ strike affecting ports including Hamburg, Bremerhaven, Bremen, Emden, and Brake. The Verdi trade union has threatened further action if negotiations for a new collective labour agreement do not progress.

Additionally, inquiries for Butadiene from downstream synthetic rubber sectors, notably NBR and PBR, as well as from the ABS polymer industry, remained subdued in the domestic market. This was driven by lower-than-expected consumption from key end-users in automotive and construction sectors, further pressuring Butadiene prices. Consequently, prices for Butadiene FD Hamburg settled at USD 1104/MT for the week ending June 28th. Heading into summer, optimism for demand improvement was low, with many anticipating a consumption dip in July and August, aligned with a slowdown in downstream products.

In the broader economic context, inflation in the Eurozone resumed its downward trend in June, decreasing from 2.6% in April to 2.5% in June. Conversely, the European Central Bank reduced interest rates by 25 basis points on June 12th, marking the first decrease since 2019. Market players report that this decline is unlikely to affect short-term Butadiene demand within the downstream industry.

Despite persistent strength in upstream Naphtha costs driven by rallying crude oil prices, the increase in production costs for Butadiene has not translated into higher realized prices. Overall, tepid demand and sufficient inventories have dominated the domestic Butadiene market, contributing to price declines.

Looking ahead, ChemAnalyst anticipates that Butadiene prices might continue to decline across the European market amidst easing downstream demand amid economic uncertainties. Additionally, Butadiene supply is expected to increase with declining new orders. However, increases in feedstock Naphtha prices, alongside bullish forecasts for crude oil prices, are unlikely to significantly impact the broader Butadiene market.