Hamburg (Germany): Towards the last week of February 2024, Butadiene prices have been on a bullish trend across the European market. The rising energy and feedstock prices underpin cost support, allowing manufacturers to raise their offers. However, demand for Butadiene from the downstream derivative industry has failed to catch up amid macroeconomic headwinds, but this had limited impact on Butadiene prices in the regional market.

Prices of Butadiene have shown an increase of USD 12/MT in the German market. Over the past few weeks, feedstock naphtha prices have risen amid tight supply, leading to higher manufacturing costs of Butadiene within the domestic market. On the other hand, upstream crude oil prices settled higher as hostilities continued in the Red Sea, with Iran-aligned Houthis stepping up attacks near Yemen and reports of falling inventories assisting prices to edge higher. Brent crude increased by more than 7% from two weeks ago to settle at $83.56/barrel.

The ongoing rally in the energy market has raised overall production costs, primarily contributing to the firmness of the Butadiene market. Regarding domestic production, manufacturing firms have been operating at reduced rates as demand from the downstream industry has not yet improved. In the interim, market participants observe that import prices have surged to their highest points in a year, driven by prolonged transit times and skyrocketing shipping expenses resulting from the Red Sea crisis, which has prompted significant price increases.

Low inventories of Butadiene have supported prices to follow an uptrend in the domestic market. However, the pace of inquiries originating from the downstream synthetic rubber and polymer industry has remained average due to slow consumption from the end-user automotive and construction sector within the domestic market. Amidst the winter season, most market transactions were mainly based on a need-on-demand basis. Nonetheless, this was insufficient to drive the price of Butadiene lower within the domestic market. As a ripple effect, prices of Butadiene FD Hamburg were settled at USD 915/MT during the week ending 23rd February.

On the other hand, the major producer of Butadiene, BASF, anticipates the continuation of the global economic slowdown from 2023 into 2024. The projections indicate a modest acceleration in global economic growth later in the year, with an overall expectation of a 2.3 percent increase in 2024. In Europe, economic progress is hampered by elevated energy prices and unfavourable conditions for industrial value creation. BASF also envisions a 2.2 percent expansion in global industrial production.

Global chemical production is poised for a faster growth rate of 2.7 percent in 2024, primarily fuelled by the anticipated expansion of the Chinese chemical industry. The company's planning is based on an assumed average oil price of $80 per barrel of Brent crude and an exchange rate of $1.10 per euro. Looking ahead, ChemAnalyst anticipates European Butadiene prices might increase in the coming weeks as market players replenish inventories in anticipation of rising demand from the downstream industry. In addition, the feedstock naphtha outlook is firm for the time being amid strong crude oil prices and lower run rates at refineries during Q1 of 2024.